Asset Protection In Your Bankruptcy Case
In 2005, Congress passed new laws making it more difficult for wealthy individuals to relocate and take advantage of another state's more liberal exemption laws in a Chapter 7 or
Chapter 13 Bankruptcy. In the past millionaires facing financial difficulties (and sometimes criminal charges of fraud) could relocate to another state, purchase an expensive home, and file a Chapter 7 bankruptcy while applying the state's generous exemption laws to protect assets from creditors. In it's zeal to close the loopholes that allowed a few wealthy people to cheat the system, Congress created a confusing and strange set of rules to determine what state's exemption laws apply in a
Chapter 7 or Chapter 13 bankruptcy case.
First, the easy answer: if you have resided in only one state for more than 730 days, you must use that state's exemption laws. To make things a little more complex, if you reside in Arkansas, Connecticut, District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin, you are allowed a choice between your state law exemption and a set of federal exemptions.
Second, if you have not resided in your state for at least 730 days, the exemption law that applies is the state in which you lived most of the time during the 180 days prior to the 730 days. In other words, where did you live most of the time between two and two-and-a-half years before filing? See, I told you this calculation is a bit strange.
Finally, if the above tests can't decide the issue, the default rule is to use the federal exemptions only. This may be the case if you have lived overseas, or if a state requires current residency or domiciliary to use its exemptions (such as the state of New York).
The Bankruptcy Code is written by the United States Congress and is interpreted by federal court judges. Consequently, it is a set of laws that are often confusing. If you are in over your head in financial difficulty, call today and get help from an experienced Chicago bankruptcy attorney. The experienced bankruptcy attorneys at Glanzer & Associates, P.C. will guide you through the federal bankruptcy process and protect your assets.
Contact the experienced Chicago bankruptcy attorneys at Glanzer & Associates, P.C. at 1-312-644-2227 to discuss your specific situation, and to schedule your free, in-person consultation.