Yes, you can file bankruptcy after moving, but it may get a little more complicated. If you're moving to a new state, or have recently moved, you’ll need to know which bankruptcy property exemptions now apply to you. In this article, we will discuss the timing issues and other factors that may accompany a recent relocation.
Written by Attorney Andrea Wimmer.
Updated August 1, 2023
Yes, you can file bankruptcy after moving, but it may get a little more complicated. In this article, we will discuss the timing issues and other factors that may accompany a recent relocation.
Geographic limitations on the powers of the Bankruptcy Court
One of the requirements to begin a legal proceeding like bankruptcy is to file your case with the proper court. Each court has the authority to decide legal matters in a particular location or region as well as over specific types of legal matters. In legal terms, this is called the court’s jurisdiction. Bankruptcy law is federal law, so a federal court is the only court with jurisdiction, or the power, to hear a bankruptcy case. This is true for any type of bankruptcy case. Usually finding the proper court is fairly straightforward, simply file in the state where you live. If you have moved recently, however, it can be a little more complicated. That’s because a federal court does not have jurisdiction (or power) over you or your case when you first move to the state it serves.
How long after I move do I have to wait before I can file?
The general rule is that you need to have lived in your new state for the majority of the past 180 days (so, at least 91 days) to file bankruptcy in the new state. There is no specific rule for exactly when to start your 90-day residency count, rather the court will look to verify your claimed state of residency with information that you provide in your official bankruptcy paperwork. There is also no specific document to prove your residency. If challenged, you can use documents like your apartment lease agreement or utility bills to show how long you’ve lived in the state. If you have not been in your new state for the minimum period, the best course of action is to postpone filing until the 90 day threshold has passed. The only alternative is to file bankruptcy in the state you lived before, which comes with its own complications, such as having to travel back for your creditors’ meeting.
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Are there other reasons why having recently moved to a new state matters when filing bankruptcy?
Yes! It matters because of exemptions. Exemptions are the laws that determine what assets (property) you can keep after filing bankruptcy. If a piece of property is “exempt,” it means it is “protected” up to a certain amount. So, if the exemption for vehicles is $6,000, and your car is only worth $5,000, then it's safe from your creditors. If, however, your car is worth $10,000, then your bankruptcy trustee can sell it, return $6,000 of the profits to you, and distribute the rest to your unsecured creditors.
Each state has its own exemption laws and the type of property and the amount of protection offered can vary. There are also federal exemption rules and some states allow you to choose between state and federal bankruptcy exemptions. In other words, since it’s about protecting your belongings, it matters very much that you choose the right set of exemptions.
Which state law tells me what exemptions I can use?
It all comes down to how long you have lived in a particular location. You need to have lived in the state where you file for at least 730 days (two years) to use that state’s exemptions. This is to prevent people from trying to game the system for their own gain. Otherwise, someone could move to the state that has the most generous exemptions for the type of property they own, wait 91 days, then file bankruptcy. When done, they can move back home, debt-free and with more assets than they’d have been able to keep if they filed in their home state.
If you don’t meet the 730-day rule, because you haven’t lived in your current state for at least the last 2 years, then the 180-day rule kicks in. The 180-day rule looks to where you lived in the 180 days (six months) before the two years prior to filing your bankruptcy. So, where you lived 2 - 2.5 years before your bankruptcy filing. Under the 180-day rule, you can use the exemptions for the state where you lived the majority of those 180 days.
Example: You have been living in Texas for the past year. Before living in Texas, you lived in California for five years. You decide to file for bankruptcy on June 1st. The court will look back in time to (approximately) the June 1st of two years ago. They will then look at the six months leading up to that June 1st and see where you were living for the majority of that six months. So, in this example, you look to California law to determine which exemptions you can use.
Is it possible to still use my previous state’s exemptions?
If this is the first time you’ve moved in a while, chances are you’ll be looking to your prior home state’s exemption laws. But, that doesn’t automatically mean that you’ll be able to claim that state’s exemptions to protect your property in your bankruptcy.
That depends on whether your previous state allows non-residents to use their exemptions after they have moved, because not all of them do. If it is permitted, you will be able to claim your previous state’s exemptions to protect your property.
|States Where Exemptions are Not Limited to Residents|
|Iowa (limitations apply)|
|Maryland (limitations apply)|
|North Dakota (limitations apply)|
Using federal bankruptcy exemptions to get out of no man’s land
If your prior state does not allow non-residents to use their exemptions, you’re in a bit of a no man’s land. You don’t qualify for your current state’s exemptions because you haven’t lived there long enough, and you don’t qualify for your prior state’s exemptions because you don’t live there anymore.
That is where the federal bankruptcy exemptions kick in. If you find yourself ineligible to claim any state’s exemptions, you can use the federal bankruptcy exemptions to protect your property. This is true even if your prior state did not allow the use of federal bankruptcy exemptions for its residents.
Does it make sense to hire a lawyer for your case?
As you can see from the discussion of the various rules about jurisdiction, residency requirements, and how it all impacts your bankruptcy exemptions, things can get a little complicated when you are contemplating bankruptcy after a move. Additionally, if you're in the process of moving, or simply live in a state other than where you work or go to school, things can get even more complicated.
Depending on how quickly you want to file your case, it may make sense to talk to a bankruptcy attorney to help you figure out the details. If you do decide to consult an attorney Upsolve can help you find one.
If you’re able to wait until there is no question about your residency, Upsolve can help you make sure that you are using the correct exemptions to protect your property and are ready to file as soon as you cross the 90 day threshold. If you're worried about being sued in the meantime or have concerns about collection letters, keep in mind that, as a general rule, individuals can stop making payments on bills they intend to discharge in bankruptcy 90 days before filing.
What if I’ve already started my Upsolve questionnaire? What are my next steps?
If you already started your Upsolve questionnaire you may have been stopped if you stated you recently moved, will move, or have not lived in your new state more than 90 days. Once you have passed the 90+ day residency threshold you should be able to resume your questionnaire.
If it has been longer than 8 weeks since you started the questionnaire, you may be asked to restart your questionnaire to ensure the forms you will file with the court are as accurate as possible. Please contact us if you have any issues resuming or restarting your account!