Remember the kid’s geography game, Where in the World is Carmen Sandiego?
Clues took players all around the world to stop a gang of thieves.
When it’s debt you want to stop, if you’ve moved around in the past two or three years, the rules of the game are not child’s play.
Two issues are in play. One concerns which courthouse your bankruptcy case is filed in. The second is what state’s exemptions can you use.
Where you file bankruptcy
The basic rule is that you file your case in the federal district where you have lived for the past 180 days or where you have assets. The legal term for the correct court is “venue”.
If you’ve lived in several federal districts in that period, you file where you have lived for the greater part of the last 180 days.
So, if you’ve recently moved, you can file in the district where your new home is located after you’ve been there 91 days. Before that point, you can file in the district you moved from.
What you keep through bankruptcy
State law where your case is filed usually defines the extent of your property interests.
State law tells the bankruptcy court what you own, and federal bankruptcy law determines what happens to that property.
Even though bankruptcy is federal law, state law controls exemptions, the law that determines what you keep when you file bankruptcy.
Because state exemption laws range from scrooge-like to Daddy-Warbucks generous, debtors in the past sometime moved to a state with generous exemption laws before filing.
The bankruptcy amendments of 2005 tried to stop people from moving to get better exemptions. The “reform” law made a state’s exemption laws available only to people who had lived in that state for at least two years before filing.
If you haven’t lived in the state for two years, you get the exemptions of the state where you lived for the six months beyond the 24 month requirement.
And, it gets worse: you can only use those exemptions if the law of the state allows the use of state exemptions to non residents. [Thanks, Congress].
If state law doesn’t authorize use by non residents, you get to use the federal bankruptcy exemptions.
Morale of this story: if you’ve lived a mobile life in the years before filing bankruptcy, make sure your attorney knows your residential history before you file the case.
More from the Soapbox on bankruptcy procedure
File bankruptcy without your spouse
Bankruptcy as a moment in your financial timeline
Does what you own drive what kind of bankruptcy you file?
Image courtesy of Cara Brugman.