Although most of bankruptcy is governed by federal law that applies to any American living anywhere in the country, there is some state-specific information necessary for debtors to know before filing in Utah. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 imposed new requirements related to residency. BAPCPA requires a debtor filing for bankruptcy protection to be a state resident for at least 730 days (two years) prior to filing a Chapter 7 liquidation or Chapter 13 reorganization case.
Why does this matter? It comes down to the “Benjamins” – money. In this case, the state-specific exemptions for real and personal property, which deal with the assets that debtors can retain when they file bankruptcy.
Each state has its own set of exemptions that are used by bankruptcy debtors. In the majority of states, such as Utah, you are required to use that state’s exemptions. However, 17 states and the District of Columbia allow debtors to make an election between the state-specific exemptions and the federal bankruptcy exemptions. By the way, California has two possible sets of state exemptions from which debtors may choose.
Although Utah debtors may not use the federal exemptions in Utah, they may use any of the federal non-bankruptcy exemptions, which exclude property such as veterans’ benefits and federal retirement accounts.
With BAPCPA requiring that a debtor reside for two years in a particular state before claiming the exemptions of that state, what happens in the alternative? If a debtor has lived in more than one state during that two-year period, BAPCPA mandates that the exemptions of the state where the debtor lived for 180 days prior to the start of the two-year period, or for the greater portion of this 180-day period, apply in the bankruptcy case. In effect, exemptions are governed by the laws of the state in which the debtor lived longer than in any other state.
Congress enacted BAPCPA’s residency requirement to deter abusive practices by bankruptcy debtors. Their intent was to deter filers from forum shopping or moving to another state because it has more valuable bankruptcy exemptions. If you recently became a Utah resident in the last year, talk to the Morrison Law Group to learn about which state’s exemptions apply to you.
The team of attorneys and staff at the Morrison Law Group strives for complete client satisfaction. Call 801.456.9933 today to schedule a FREE consultation. We are Utah’s only statewide bankruptcy law firm and have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.