Waiting To File For Bankruptcy Until You Move Can Hurt You

When someone moves to a new state, how the bankruptcy laws affect them can change. The amount of time someone has lived in a state when they file for bankruptcy also affects how their property is treated in bankruptcy. Someone may move, and then find out that they would have been treated more favorably in their former state.

The laws that protect a bankruptcy debtor’s property are the laws of the state that they file in, if the debtor has lived in that state for at least two years. If the debtor has not lived in that state two years, then an analysis of where the debtor has lived in the last few years may be needed to determine which exemption laws apply. It may be the exemption laws from the state they moved from, a state they lived in even earlier than that, or the Federal Exemption laws.

Each state has different laws that allow debtors to exempt, protect, or withhold, certain property from their creditors. For instance, some states protect a much higher amount of equity in a home than other states do. North Carolina protects $18,500.00 equity in a home (per person) while South Carolina protects $50,000.00+ per person (note this number will adjust over time, with the first adjustment in July 2007). Some states use their own exemptions in bankruptcy cases, other states use Federal Exemptions, and some give the bankruptcy debtor a choice.

It is advisable that someone speak to an attorney before moving since the clock can’t be turned back. One would hate to move and find out that treatment was better in their former residence location. It may be more advantageous to file bankruptcy in the current location, it may be advisable to file after the move, or it may not make a difference at all. How this may, or may not, affect someone can be explained by the attorney that is consulted.