Consumer Bankruptcy:

Moving and Bankruptcy

Moving to a new home can affect a bankruptcy case in two ways. The first:
 
Under the new law bankruptcy law, BAPCPA (The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), the debtor can utilize the exemptions of the state in which he or she has lived for the 730 days (about 2 years) immediately preceding the filing of the bankruptcy petition. If someone has moved to a new state within the 730 day period, he or she is required to file under the exemptions of the state in which he or she has lived for the greater part of the 180 days preceding the 730 days than in any other state. Furthermore, some, though not many, states give the debtor the option of choosing the state’s exemption scheme or the scheme provided by the Bankruptcy Code. Also of note: some states do not allow non-residents to use their exemptions schemes. Therefore, if the debtor would be entitled to no exemption, because of where he or she resided for the preceding 730 days and 180 before that, then the new bankruptcy law allows the debtor to use the exemptions of the Bankruptcy Code. 
 
In the event that some of a states exemptions apply (perhaps those concerning personal property) but others do not (for example, the homestead exemption), the law does not clearly state what should happen. This can only be clarified by court decisions and legislative amendments.
 
The second:
 
In some states, the homestead exemptions provided exceed $125,000. However, the quantity of exemption greater than $125,000 for interest acquired within the preceding 1215 days (approximately 40 months) is eliminated by BAPCPA. When a debtor owned a home in the state for more than 1215 days and then rolled the money made in the sale into a new home within the 1215 days, BAPCPA provides an exemption. Therefore, it would seem that BAPCPA means that an individual who moves more than once within the same state would be limited to a homestead exemption of $125,000. However, this was rejected by one judge thus far, who ruled that the debtor was allowed to rollover the proceeds of more than one home sale while retaining the homestead exemption of the state.

 

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