Filing Bankruptcy After Moving to Another State or District

Most people file for bankruptcy in the closest court and use their state’s exemption laws to protect their property. However, the rules become more complicated if a filer moves states within two years before filing. In this situation, you'll use "venue" rules to determine the federal court you’ll file in. "Domicile" rules will govern whether you'll use the current or previous state's exemption laws to protect your property.

Filing for Bankruptcy After Moving From Another State

You must live in your current location for at least 91 days before filing there or "the greater part of the last 180 days." (28 USC §1408(1).) The time limit applies only to the court location where you’ll file your case.

Choosing the Correct State's Property Exemptions

Bankruptcy exemption laws protect property from creditors when filing for bankruptcy. If you've lived in several states before filing, the "domicile" rules will determine which state's exemption laws you'll use (more below).

Domicile rules differ substantially from the venue rules. Although you can file in a particular court after living in its jurisdiction for 91 days, you must live in the new state much longer before becoming eligible to use its exemptions. The lengthier period prevents people from taking advantage of another state's more generous property protections.

How "Domicile" Affects Bankruptcy Exemptions

Your permanent residence is your domicile. In most cases, it's where you're registered to vote, pay taxes, and intend to make your permanent home. Although it's likely where you currently live, it isn't always the case. For instance, if you usually live in California but are in Texas for a temporary work assignment, your domicile will be California.

The 730-Day Rule

If you've been domiciled in your current state for the 730-day (two-year) period before filing for bankruptcy, you can use that state's exemption system or the federal exemptions if that state allows you to choose between the two. If you haven't been domiciled in the same state for two years, you'll use the 180-day rule to determine your state exemptions.

The 180-Day Rule

If you haven't lived in the same location for two years, you must use the exemptions of the state you lived in for the better part of the 180-day period (91 days or more) immediately before the two years preceding your bankruptcy filing date.

For instance, suppose you filed for bankruptcy on January 1, 2024, in a state you'd lived in less than two years. You'd look to your domicile from July 1, 2021, through December 31, 2021, and use that state's exemptions.

How to calculate this. You'll need to know the date two years before and two-and-a-half years before your bankruptcy filing date. Determine which state you lived in 91 or more days during those 180 days and use that state's exemption laws.

When State Exemptions Aren't Available

Sometimes, the rules result in being ineligible for any state's exemption system. A state might not allow nonresidents to use its exemptions after moving away, or you might not have been domiciled in the U.S. during the applicable period.

In that case, you can use the federal exemptions. So, if you were a former resident of a state but can't use its or your current state's exemptions, or you can’t establish domicile, you can use the federal bankruptcy exemptions.

Exemption Limits for Homes

Some states have a generous or unlimited homestead exemption a filer can use to protect home equity. However, if you haven't owned your home in that state for 40 months before filing, federal law limits your state's homestead exemption to $189,050 even if you otherwise qualify to use that state's exemptions. (This amount applies to cases filed between April 1, 2022, and March 31, 2025.)

If you sell a home and use the proceeds to buy a new home in the same state, you can combine the ownership time of both houses. Your exemption amount won't be reduced if the total time satisfies the 40-month rule.

When to Get Legal Help

No one wants a mistake to cause property loss in bankruptcy. Before applying the above rules, consult with an attorney in your area. A bankruptcy lawyer can explain your options and help you reach the best possible outcome.