Updated May 20, 2016
Determining which state bankruptcy exemptions you can use if you file for Chapter 7 or Chapter 13 bankruptcy is a key component of your bankruptcy filing. Bankruptcy exemptions determine what property you keep (in Chapter 7 bankruptcy) or how much you pay to certain creditors through your bankruptcy plan (in Chapter 13 bankruptcy). (To learn more about bankruptcy exemptions, see Bankruptcy Exemptions – What Do I Keep When I File for Bankruptcy?)
Which state bankruptcy exemption system you may use depends on where you have been “domiciled” for a certain period of time. 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. That means, where you get mail, vote, and pay taxes. Your domicile might be different from where you are living at the moment. For example, 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.
Here are the rules:
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 $160,375. This cap does not apply if you bought the home with proceeds from the sale of another home within the same state.