Filing for Bankruptcy After Moving? Keep Your Exemptions!
Did you know it’s possible to live in one state but apply the exemptions from another state when filing for bankruptcy?
Keep reading to understand how residency affects a bankruptcy case.
How Residency Requirements Affect Bankruptcy Exemptions
Residency requirements are common in the law. For example, say you want to file for divorce and believe the law is more favorable to you in another state. Suppose you live in Florida and you are fifteen minutes away from Georgia. Why not go for a quick cup of coffee in Georgia and file for divorce while there?
That wouldn’t be possible because you haven’t complied with Georgia’s residency requirement of six months to file for divorce. Most states have a six-month residency requirement to file for divorce.
Residency requirements exist to prevent that exact situation. Also, for courts to have jurisdiction, especially if there are children or assets like a house in Florida, that would be the state of proper jurisdiction.
Forum shopping is the term used when someone is trying to file a state they believe is more favorable.
Bankruptcy Residency Requirements
When filing for bankruptcy, there are also residency requirements. For example, Florida has unlimited homestead exemption. So, let’s reverse the prior example.
Suppose the debtor resides in Georgia, and their house has $300,000 in equity. Georgia’s homestead exemption is $21,500. Why not sell the house, drive fifteen minutes south, buy a new home in Florida, and file for bankruptcy there?
This would protect the home’s equity, and nothing would change in the debtor’s life. The debtor can even continue working for the same employer.
That’s not possible because of the residency requirements. The Bankruptcy Code has two dates on which to focus regarding residency requirements.
The 180-Day Rule in Bankruptcy
In the above example, does the debtor file for bankruptcy in Florida or Georgia? The answer depends on how long the debtor has lived in Florida.
The first requirement is six months of living in Florida. This is known as the 180-day rule. What is important is where you have lived the longest during the last six months, determining where to file.
Therefore, the bankruptcy petition can be filed if the debtor has resided for more than ninety days in Florida. Great! That’s it, right? Not exactly.
The 730-Day Rule
Even though the debtor has complied with the 180-day rule, there’s still the issue of which state exemptions to apply.
In this case, Georgia state exemptions would apply even if the debtor was living in Florida and filing for bankruptcy. That’s one of the unique things about bankruptcy law. You might live in one state but apply the laws of another state.
Usually, it doesn’t work that way, but a bankruptcy case is different.
So, the ninety-day rule allows you to file for bankruptcy as a Florida resident, but you are applying Georgia law.
To file and receive the benefits of Florida’s exemption, the debtor must reside for 730 days or two years in Florida. This is known as the 730-day rule.
Note that homestead exemptions offered by your state for valuation and taxes are not the same as homestead exemptions when filing for bankruptcy.
Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.
When to File the Petition to Take Advantage of Bankruptcy Exemptions
Since we live in a mobile society, it is important to know the state’s exemptions when filing for bankruptcy. That way, a comparison can be made between the two states to determine if it’s more favorable to file after 91 days in the new state to apply the prior state’s exemption laws.
Sometimes, it’s better to wait 730 days to take advantage of the new state’s bankruptcy exemptions.
Remember to always consult with a local qualified bankruptcy lawyer as the information on this site should be used for informational purposes only.
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Updated on March 17, 2025.
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