If you file for a “debt liquidation” bankruptcy under Chapter 7 of the United States Bankruptcy Code, the Trustee has an economic incentive in selling assets for the benefit of creditors. But the Trustee cannot just take what they want. In the vast majority of cases, you can keep all of your property in a bankruptcy. There are exemptions, or protections, that you can place on your property so that the Trustee cannot touch them and you can keep them. Even if you file for a “debt repayment” bankruptcy under Chapter 13, the exemptions still play a significant role in what percentage of the debt you have to repay to your creditors. There are various types of exemptions you can use for different kinds of property.
Part 1 and 2 of this series treated exclusively on the details of the Federal exemptions. Part 3 emphasized the difference between the Federal exemptions and the Michigan exemptions, as well as some of the more common Michigan exemptions. If you have lived in the State of Michigan for at least the last two years prior to filing for bankruptcy, you can use the Federal exemptions or the Michigan exemptions. Part 4 of this article focuses on what happens if you have lived in the State of Michigan for less than two years prior to filing for bankruptcy.
Each State has its own laws regarding how much property you can “exempt” or protect in bankruptcy. The State exemption laws that apply to you depends upon the State in which you lived for the two years immediately preceding the date you file for bankruptcy. If you have lived in more than one State over the last two years the law that controls your exemptions is the State in which you lived for six months immediately preceding the two year period, or for a longer portion of the six month period than in any other State. If you lived in Ohio all your life but had to travel to Florida for a family gathering, that does not mean you “lived” in Florida for exemption purposes because you do not reside there.
Some States allow you to choose either the Federal exemptions or the exemptions of that State. The nineteen States that allow you to use choose either the Federal exemptions or that State’s exemptions are: Alaska, Arkansas, Connecticut, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. Although it is not a State, the District of Colombia allows you to choose either the Federal exemptions or the District of Colombia exemptions.
Some States do not allow you to choose the Federal exemptions, you must use that State’s exemption laws. The thirty-one States that require you to use that State’s exemptions are: Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.
The above information is a general overview and is not intended to be used as legal advice. You may be living in Michigan, which means you have to file your bankruptcy in Michigan, and yet still have to apply the exemption laws of another State because you have only lived in Michigan for the last four months. The State you came from may allow you to use the Federal exemptions or may require you to use that State’s exemptions.
If you are considering filing for bankruptcy, the best thing to do is call our office at 248-557-3645 and schedule a free consultation so you can receive advice which is tailored to your specific circumstances.
By: Michael Benkstein, Esq.
Managing Attorney, Bankruptcy Department
The Law Offices of Joumana Kayrouz, PLLC