If the time has come to declare that you can no longer pay your financial obligations given your income, a chapter 7 may be in your future. When it comes to residency requirements for filing bankruptcy, you must reside in a state for two years before you can file using the laws of that state. The place you live matters a great deal when it comes to filing bankruptcy, as you can see from the information below, so read on to find out how your state of residence affects your filing.
Median Income and the Means Test
One of the biggest differences in states with regard to bankruptcy is the median amount the residents earn. This number also influences your ability to file for chapter 7. With the retooling of the bankruptcy codes in 2005 came income restrictions for filers. If a filer earns more than the median, an extra form called the means test must be completed. This form allows some filers who have larger expenses in certain categories, like mortgage and medical needs, to file even with a higher income. Those who make large incomes in comparison to their fellow residents and those who are employed remotely can easily exceed the median levels. If you are unable to file for chapter 7 bankruptcy even after completing the means test, consider a chapter 13 filing. Chapter 13 filers have no income restrictions whatsoever.
State Exemptions and Keeping Property
If there is one aspect of filing a chapter 7 bankruptcy that makes filers hesitant, it's the potential to lose property. Chapter 7 can create a situation that leads to some filers losing property like homes, vehicles, boats, and other property. A chapter 7 declaration means turning your financial holdings over to the bankruptcy court trustee. The trustee has the power to seize your property and sell it to pay some of your debts. Fortunately, there are exemptions in all states.
Exemptions allow a certain sum of money to be deducted from a given item so that filers are more likely to keep it. For example, an exemption of $10,000 could allow a filer who has a vehicle to keep it if the vehicle is valued at that amount or less after any balance on the loan is considered. Exemptions, however, vary widely by state. If you have property that might be lost with a chapter 7 filing, you should take a close look at your state exemptions. Your property might be better protected in other states but you have to file in your state of residency. Some states do give filers the choice of using federal or state exemptions, however.
All filers want to get the most out of a filing without having to lose property, so speak to a bankruptcy lawyer to find out more.
For more information, contact a bankruptcy law firm.