Have you moved lately? It can make a big difference in bankruptcy!

01 Feb Have you moved lately? It can make a big difference in bankruptcy!

Your bankruptcy lawyer should ask you how long you have lived in your present state. If you’ve lived there two years or more, we know that your present state’s laws are what we need to look at to know what you are entitled to keep in bankruptcy. But if you’ve lived in your present state less than two years, then we need to know where you lived the greatest part of the 180 days before those two years. Sounds complicated doesn’t it?

The Bankruptcy Code doesn’t want you to move around to select the state with the best exemptions. This became a big deal when people moved to Texas and other states to claim unlimited homestead exemptions. So we look back 6 months before two years if you’ve lived someplace less than that two year period.

That raises interesting questions too. Sometimes, the laws of the place you moved from don’t allow its exemptions to be used by people who live outside of that state. This rule is called the rule against extra-territoriality. If that happens, don’t worry. You still get to claim federal exemptions.

We find that many lawyers forget to ask this question. It’s important. So if your lawyer doesn’t ask you where you have lived, be sure to tell him.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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