I just moved to a new state, and I need to file for bankruptcy. Should I file for bankruptcy now or later? What kinds of things should I consider?
If you have moved to a new state, whether you should file for bankruptcy now or wait depends on:
When you file for bankruptcy, your goal is to exempt as much of your property as possible using bankruptcy exemptions to protect your assets. You'll lose property you can't protect with an exemption in Chapter 7 bankruptcy, and you'll pay the value nonexempt property in Chapter 13 bankruptcy.
Also, each state has a unique set of bankruptcy exemptions and different rules regarding whether you can use the federal bankruptcy exemptions instead of your state's bankruptcy exemptions.
Find out how to prevent losing property in Chapter 7 and learn about using bankruptcy exemptions in Chapter 13.
Just because you moved to a new state doesn't mean you're automatically entitled to use its bankruptcy exemptions. Whether you can use a state's exemptions depends on how long you have been "domiciled" or a permanent residence in that state.
Before you can use a state's bankruptcy exemptions, you must be continuously domiciled in that state for at least 730 days before your bankruptcy filing date. Otherwise, the 180-day rule determines which state's exemptions you must use. As a result, if you recently moved to a new state and want to use that state's exemptions, you will typically need to delay filing your bankruptcy.
If you have not lived in your new state for at least two years, you have to use the state's exemptions where you were domiciled for most of the 180-day period before the two years preceding your bankruptcy filing. So if you still want to use your old state's exemptions, this rule can help you as long as you file your bankruptcy within two years of moving (otherwise, you will have to use your new state's exemptions).
Example. Let's assume you lived in California from January 1, 2002, through July 15, 2011. You moved to Texas permanently on July 16, 2011. It is now January 1, 2012, and you want to file for bankruptcy. If you decide to file now, you would have to use California exemptions because you were domiciled there for the relevant 180-day period before your bankruptcy, July 1, 2009, through December 31, 2009.
If you don't qualify to use any state's exemption system with the 730-day or the 180-day rule, you can use the federal bankruptcy exemptions.
If you want to take advantage of your new state's generous homestead exemption, you must satisfy the domicile requirements above and another condition. You must own your home in that state for at least 40 months before your bankruptcy. Otherwise, your homestead exemption is capped by federal law at $189,050.
This rule applies even when your new state's homestead exemption is larger, and you are otherwise eligible to use its exemptions. The amount adjusts every three years, with the next adjustment occurring on April 1, 2025.
To find the homestead exemption amounts in each of the 50 states plus D.C., see The Homestead Exemption in Bankruptcy. To learn more about when to file for bankruptcy, see the articles and Q&As in our Timing Your Bankruptcy topic.
Answered by: Baran Bulkat, Attorney
Updated April 7, 2022