It varies from state to state. When you file a bankruptcy, you get to keep property that is considered exempt under the laws of your state. Wow! That’s great: get rid of debts and keep the house, car, and whatever…
Of course, it’s not quite that easy and the exemptions can vary from state to state. Those differences can be dramatic ranging from a complete exemption for your home no matter what it is worth to an exemption of only a few thousand dollars!
One of the loop-holes that the new bankruptcy law from ten years ago “fixed” was allowing you to move to another state with better exemptions. Now you can still move and file bankruptcy there, but you have to use the exemptions from the state where you used to live (assuming you were there for at least two years). As with all things in bankruptcy, check with a good attorney where you live to understand your state’s exemptions.
In California and the 9th circuit (the western states), you can even change the status of your property right before filing bankruptcy and get the exemption. For example, if you have money in a savings account and can put it in a 401 or an IRA, in most cases it will change from being non-exempt (you lose it if you file bankruptcy) to exempt: you get to keep it.
The Supreme Court seemed to say the same thing indicating that so long as it is not done in bad faith, the courts don’t have the authority to disallow exemptions. Basically they said, a bankruptcy debtor has the power to choose which exemptions to invoke.
If you have to file bankruptcy it’s worth knowing what property you can keep and how you can maximize that before you file. Find a competent bankruptcy attorney in your state for help.
Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-254-1704.