Many people struggling with finances are faced with the question of moving to find a better job, a lower cost of living or affordable housing. Moving out-of-state may help your financial situation, but what if bankruptcy proceedings have already begun? Can a petitioner move out-of-state during a bankruptcy is ongoing? What will happen to the case if that occurs? Can filing be done in a new state once the person has moved? Let’s examine these questions about moving and bankruptcy.
- Can a person filing for bankruptcy move out-of the area?
Having an active bankruptcy case does not bar a debtor from moving out of the state or local area. A good rule would be to inform both your bankruptcy attorney and the bankruptcy trustee who is in charge of dealing with your petition; they will notify all the respective parties that require being notified of your move. Your bankruptcy attorney in particular will need to have easy access to send necessary paperwork as well as contact you in case any thing changes or moves forward with your case or if questions that arise regarding your paperwork. So knowledge of your current whereabouts, if you relocate, is essential.
- Will the bankruptcy case be required to move courts or start over in a new location?
The bankruptcy case will continue in the court where it originated and will not need to change courts to your current location. Federal bankruptcy laws apply across the country so it will continue the same relationship and communication with the creditors regardless of a move.
- Is it better to find a state that has better exemption laws before deciding on relocation?
Part of the goal for a debtor in a bankruptcy case is not only to wipe out a debt and start fresh but also to exempt as much property as possible. Exemptions protect your assets in Chapter 7 bankruptcy and help you pay less to unsecured creditors in a Chapter 13 bankruptcy. There are several factors that come into play with moving and gaining a better exemption. These include issues such as: which state offers more favorable exemptions, when the move occurred, and how much property is owned. Each state offers a unique set of bankruptcy exemptions. Many states have fairly comparable exemptions and the difference would be negligible. However, some state exemptions can be quite onerous. If you do your research and decide on a state that can protect more of your assets then delaying a filing may be necessary because of the 730 Rule and the 180 Rule. The 730 Rule or two year rule means you must be continuously domiciled in that state for at least 730 days (2 years) prior to your bankruptcy filing date. Otherwise, the 180-day rule determines which state’s exemptions you must use. The 180 Rule explains that unless you have lived in a state for two years, the filing would use the exemptions for the state that you lived in for most of the 180 days or six months prior to the move. However, moving to avail yourself of a better state exemption (i.e. in New York, a debtor can only under state law exempt $50,000 in equity in a primary residence; in Massachusetts, that equity exemption is $500,000) is complex and must be done correctly. Consult with your bankruptcy attorney well in advance of your filing if possible.