09 Mar Moved Across State Lines Within the Past Two Years? Special Rules Apply
The Bankruptcy Code contains a trap for the unwary in its treatment of debtors who have moved from one State to another. Section 522(b)(3)(A) of the Code provides that a debtor cannot use the exemption rules for his current State of residence unless he has resided in that State for at least two years. If you file a bankruptcy case within that two year period of time, you must use the exemption statute from your former State of residence.
This provision was added to the law to stop “forum shopping” in which wealthy debtors moved from States with stingy exemption rules to States with generous exemption rules – like Florida or Texas. Although most of the bankruptcy laws are federal and apply no matter where you file, the Code allows States to set out their own rules about property which can be sheltered from creditors and the trustee. Georgia, for example, has a very limited exemption statute that allows a debtor to protect only $10,000 worth of equity in his house. Florida, Texas, Iowa, Kansas and South Dakota allow debtors to shelter over $100,000 worth of equity in a bankruptcy.
What you need to know is this:
- if you have moved into your current State within the past two years, you need to advise your lawyer. In these cases, your lawyer will have to apply the exemption laws from your previous State of residence. Your lawyer must know about any recent inter-state moves in order to help you choose the correct type of bankruptcy filing or whether to file at all.
- if you have moved your residence at all within the past four years, you need to advise your lawyer as there are a number of rules that could affect your right to fully claim your real estate exemption.
As you can see from this one example, the rules that govern exemptions have become very complicated, and mistakes can be costly. Lawyers who dabble in bankruptcy may not know all of these picayune rules – your interests will best be served by retaining a lawyer who practices regularly in the consumer bankruptcy area.
Jonathan Ginsberg, Esq.
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