Updated March 18, 2019
Bankruptcy exemptions are an important part of bankruptcy planning. They determine what property you keep in Chapter 7 bankruptcy and how much you pay to certain creditors through your bankruptcy plan in Chapter 13 bankruptcy. In this article, you’ll learn which state’s bankruptcy exemptions you can use when filing for bankruptcy.
If you aren’t sure which bankruptcy chapter will be best for you, read When Is Chapter 7 Bankruptcy Better Than Chapter 13?
Which state bankruptcy exemption system you can use will depend on where you have been “domiciled” for a certain period. For this reason, the rules are sometimes referred to as domicile requirements.
For purposes of bankruptcy law, your domicile is where you make your permanent home, and it might be different from where you are living currently. For instance, if your home is in Texas, but you are temporarily living in Massachusetts because of military duty or a work project, your domicile would be Texas, not Massachusetts. You’ll look at where you get mail, vote, and pay taxes.
You’ll find links to all of the state bankruptcy exemptions in Bankruptcy Exemptions—What Do I Keep When I File for Bankruptcy?
Here are the points you’ll consider when figuring out which state’s exemptions you’ll be entitled to use.
The homestead exemption has a special rule. If you acquired a home in your domicile state within 40 months before filing for bankruptcy, your homestead exemption is capped at $170,350, as of April 1, 2019. The figure changes every three years and is $160,375 for cases filed between April 1, 2016, and March 31, 2019. (11 U.S.C. 522(q).) The cap doesn’t apply if you bought the home with proceeds from the sale of another home within the same state.