The proper place to file your bankruptcy petition is in the federal bankruptcy court located where you live, maintain your principle place of business, or keep your primary assets for the majority of the 180-day period before filing.
Bankruptcy provides financial relief to both individuals and business owners struggling with overwhelming debt. It starts when you file the required paperwork, called a petition, with the bankruptcy court. (Find out more about filing Chapter 7 bankruptcy.)
It is important to file your petition in the right court. As a rule of thumb, you typically file your bankruptcy petition in the place you lived or operated a business for the majority of the past 180 days. Here are the two parts to the rule.
The law allows you to file your petition in one of three different places. These are your filing choices:
All of the above rules apply to where you, your business, or your assets have been during the 180-day period immediately before you file for bankruptcy. This is simple to figure out if you haven't moved around during this 180-day period.
But if you've moved one more more times shortly before filing, then you file wherever you were the majority of the time during that 180-day period. For example, if you lived in Texas for ten years, but moved to Arizona two months ago, Texas is the proper place to file because you lived there for the majority of the 180-day period. It’s important to realize that you may have to use Texas exemptions, however. (Find out more about how moving affects your bankruptcy exemptions.)
Once you decide where to file, you need to find the right court. You don’t file your bankruptcy petition in the state court where you go for most of your other legal needs, such as divorce filings or paying traffic tickets. You must locate the federal bankruptcy court that covers your geographical area.
It's fairly simple to find the right court. Go to the court locater page on the United States Court’s website. After selecting the correct state, a list of federal courts appears, including bankruptcy courts. It is a good idea to verify that the court located closest to you is the right one by either calling the clerk of the court or referring to the particular court’s website.
The bankruptcy clerk will take your petition regardless of where you file. If you get it wrong, however, the bankruptcy trustee or a creditor may file a motion asking the judge to either move or dismiss your case. If no one objects, your bankruptcy petition moves forward.
It might not be a good idea to file far away from your creditors or assets, no matter what your instincts say. Here is why.
When most of your debts are from running your business, it makes sense to file where your business is located. For example, if you own a yogurt store in Provo, Utah and your primary creditors are the frozen yogurt mix supplier, the paper cup distributor, and local radio station, your creditors may claim that the location is inconvenient if you file in your home state of Nevada.
When your creditors stand to get money from your bankruptcy, your case is an “asset” case. (Learn more about what an asset and no asset bankruptcy case is.) Since liquidating, or selling your assets is the job of the trustee, a creditor or trustee may question whether the assets can be sold efficiently if your assets are far away.
When you don’t have any assets, and most of your debts are consumer debts, it is a good idea to file where you live – even if you have a business. Consumer debts are personal obligations for things you used for yourself. This includes items and services such as:
As long as the majority of your debts are consumer in nature and you file close to home, it will be difficult for a trustee or creditor to justify moving the location of your bankruptcy elsewhere.