Yes! Amendments to the Bankruptcy code in 2005 affect which State’s exemption law applies in your bankruptcy case. The law says that if you have not lived in your current State for 730 days or more (2 years), then the exemption law of the State where you lived in the last 180 days prior to moving to y our new State will apply. While this sounds somewhat technical, it basically means that if you have lived in one State, say Arizona, for more than 730 days Arizona law will apply, but if you have not lived in Arizona for the last 730 days then your old State’s law will apply. The important question is HOW can this affect my bankruptcy?
Under bankruptcy law, each State is allowed to create its own exemptions. Exemptions are important because they allow you to protect certain assets from your creditors in bankruptcy up to a certain dollar amount. For example, in Arizona you are allowed to protect up to $150,000 of equity in your home. This means that if your home is worth $300,000 and your mortgage is only $150,000 you will be able to protect your home’s equity, keeping the value away from your creditors. However, some States have lower or higher exemptions. For example, Colorado’s homestead exemption is only $60,000. This means that if you moved from Colorado to Arizona 1 year ago (365 days), Colorado’s exemption law would apply and you would be forced to sell your house in bankruptcy using the figures in the above example. Obviously this could have a serious impact on your case and whether you file bankruptcyat all. Of course, you also may be able to benefit from such a situation if the State you moved from has more “generous” exemption laws.
Another exemption limitation to be aware of is the 1,215 day cap for homestead exemptions. This new law, passed in 2005, limits your homestead exemption to a federally stated amount that is adjusted every year. Most recently this cap was listed at $136,875. This law means that if you acquired your current home in the last 1,215 days (3 years, 4 months) then the maximum exemption you can take is $136,875 even if your State’s exemption law allows for a more generous exemption. This means that if you bought a house in Arizona within the last 3 years, 4 months, your exemption will be reduced from $150,000 to $136,875. Unfortunately, the law does not work in reverse. If your State’s exemption for a home is $50,000, you do not get to take an exemption of $136,875.
Since exemption law can be confusing and vital to the success of your bankruptcy it is important to contact an attorney who can help you prepare for bankruptcy and determine which laws will apply to your case. After all, maximizing your exemptions will allow you to keep more of your assets.
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