In previous posts I’ve written about bankruptcy exemptions and what they are. Generally speaking the exemptions are what protect certain bits of your property from seizure by the bankruptcy trustee. These exemptions vary from state-to-state. Some states, like Nevada, have very good exemptions, and some states, like Utah, have not-so-good exemptions. (For example, a debtor may keep a vehicle with $15,000 in equity in Nevada, but only $3,000 in equity in Utah).

Because of these varying exemptions, some debtors may think it attractive to move to a state with good exemptions just before filing a bankruptcy so they can get maximum protection for their property. However, the law is ahead of these debtors, and has already created rules that govern these situations.

Debtors are generally required to file their bankruptcy in the state in which they have lived for the majority of the last 6 months. Hearing this, an enterprising debtor now residing in Utah might be thinking, “Well, I’ll just move to Nevada, live there for 3-6 months, and then file! That way I can get the higher exemptions.” That debtor should STOP and consider the following: the law has considered this as well. Debtors are generally only allowed to claim exemptions from a state they’ve lived in continuously for the last 2 years before filing. This means that they must establish a residency in Nevada and then live there for 2 years before filing bankruptcy if they want to get the Nevada bankruptcy exemptions. Bottom line: where you file and which exemptions you can claim are two separate determinations. It is possible to file in one state but have to claim another state’s exemptions.

There are a slew of more complicated rules for unorthodox situations, such as when a debtor hasn’t lived anywhere for 2 years at a time, etc. An experienced bankruptcy attorney can assist a debtor with determining 1) where they can file a bankruptcy, and 2) which exemptions they qualify for. These determinations may have great ramifications for debtors and their families.