The purpose of the homestead exemption in bankruptcy is to allow you to keep certain property that is deemed to be essential for daily life. The general line of thinking is that a person cannot retain the minimum of dignity and self respect to which all members of our society are entitled unless they are permitted to keep this property safe from the collection efforts of creditors. In very general terms exempt property includes the protection of your residence (usually with a specific cap on its value), a motor vehicle (with a cap on its value), household items, personal items, retirement benefits etc. Exemptions differ from state to state and could have a substantial impact on the outcome of your bankruptcy case. For example, Arizona has a homestead exemption of $150,000 while the homestead exemption in Utah is only $20,000 for an individual, $40,000 for a married couple.

In an attempt to prevent people from moving to a state with more favorable exemptions right before filing bankruptcy, congress passed a law that says the state exemption law that applies to a person filing bankruptcy is determined by the state in which that person is domiciled for the 730 days immediately proceeding the filing date. If your residence has not been in a single state for that 730 day period, the applicable state exemption law is the state in which you are domiciled for the 180 days immediately proceeding the 730 day period, or the state in which you resided the longest in that 180 day period. There are other factors in determining which state exemption laws will apply to your case, or whether no state exemptions apply which means you will use the federal exemptions. How can the federal exemptions apply? Some states have adopted the federal exemptions while some have specifically rejected them. The states that have rejected the federal exemptions are called “opt-out” states, but some of those states have laws that require you to be a resident in order to use them. So if you moved to Tucson, Arizona five months after living in Utah for twenty years, but Utah has a residency requirement to utilize their exemptions than your only exemption option is federal. Confused?

Find a competent Tucson bankruptcy lawyer and rely on his guidance if you intend to file bankruptcy in Tucson, AZ. You will need to find a Tucson bankruptcy attorney you can trust to guide you well.

Stephen Trezza, Tucson Bankruptcy attorney.