Most people file for bankruptcy in the bankruptcy court closest to their home and use their current state’s exemption laws to determine the property they can keep. But the rules are more complicated if you’ve moved from another state. "Venue" rules will determine which court you’ll file in, and "exemption domicile" rules will govern your state exemptions.
You must reside in the jurisdiction where you want to file for the greater part of the last 180 days. (28 USC §1408(1).) In other words, you must have lived in your current location for at least 91 days before you can file for bankruptcy there. After that, you can file for bankruptcy where you live.
While this general jurisdiction rule applies to all bankruptcy filers, it pertains only to the court location where you’ll file your case. The laws you’ll use to protect your property will depend on the applicable exemption laws.
You don’t lose everything you own when you file for bankruptcy. Bankruptcy exemption laws tell you the type and amount of property you’ll be able to protect. If you've lived in several states before filing, the set of exemption laws you’ll use will depend on where your "domicile" was before the bankruptcy.
Find out more about the two most common types of bankruptcy.
Each state has exemption laws that determine how much property you can protect in bankruptcy. Bankruptcy exemptions vary significantly from state to state, with some states having generous exemptions. In contrast, others are more meager (federal law has an exemption set, too, and some states allow you to choose between the state and federal exemption system).
In Chapter 7, exemptions let you protect property from your creditors. In Chapter 13, exemptions help determine the amount you'll pay to creditors in your repayment plan (you get to keep all of your property, but you have to pay for anything that isn't covered by an exemption).
Your domicile is the place you consider your permanent residence. 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 you're temporarily located in Texas for a work assignment, your domicile is still California.
If you've been domiciled in your current state for the 730-day (two-year) period before filing for bankruptcy, then you can use that state's exemption system (or the federal exemptions if that state allows you to choose between the two). The rule ensures that people don't temporarily move to another state just to file bankruptcy and take advantage of that state's more generous exemptions. But if you haven't been domiciled in the same state for two years, then you'll use the 180-day rule to determine your state exemptions.
People who didn't live (domicile) in the same location for the two years before filing bankruptcy must use the exemptions of the state they were domiciled in for the better part of the 180 days before the two years before your bankruptcy filing date. In other words, you'll use the exemptions of the state you lived in during the two- to two-and-a-half-year period before filing. For instance, if you filed for bankruptcy on January 1, 2020, and you didn't have the same domicile for the preceding two year period. You'd look to your domicile from July 1, 2017, through December 31, 2017, and use that state's exemptions.
Sometimes the rules result in not being eligible for any state's exemption system. Some states don't allow non-residents to use their exemptions after they have moved away. Or you might not have been domiciled in the U.S. during the applicable period.
Fortunately, the bankruptcy code has a solution. If a state's domiciliary requirement renders a debtor ineligible for any exemptions, the debtor can elect the federal exemptions. In other words, if you were a former resident of a state but couldn't use its or your current state's exemptions, or you can’t establish domicile, you can use the federal bankruptcy exemptions.
Many states have homestead exemptions you can use to exempt and protect the equity in your home. Some states have very generous or unlimited homestead exemptions. However, if you haven't owned your home in that state for 40 months before filing the bankruptcy, federal law will limit your state's homestead exemption to $170,350 even if you otherwise qualify to use that state's exemptions. (This amount is current for cases filed between April 1, 2019, and March 31, 2022.) If, however, you sold a home and used the proceeds to buy a new home in the same state, you can combine the ownership time of both houses to satisfy the 40-month rule.
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.