How States Differ on Bankruptcy

Ready to file bankruptcy? You should be aware that the state you live in might have an affect on certain aspects of your case. Although the various types of bankruptcy are all filed in the federal courts and governed by federal law, there are specific Chapter 7 and Chapter 13 bankruptcy rules that are specific to each state. When you are searching for bankruptcy help you will want to make sure that whatever attorney you choose is familiar with your particular state bankruptcy rules.  So how does bankruptcy work from state to state? The specific state bankruptcy rules are called “exemptions” and they differ from state to state due to a number of variables.

Exemptions are essentially rules that give the value of certain items that the state will allow a person filing bankruptcy to protect. Commonly “exempted” items are equity in real estate and/or vehicles, household items, and personal items. For instance, in Illinois the state exemption for equity in real estate will protect $15K for a single filer, and $30K for a joint bankruptcy. Any equity that exceeds the exemption amount is ultimately unprotected and could be liquidated by the bankruptcy trustee. If you are worried about the equity in your home being a potential problem, do the math yourself by subtracting the current fair market value of your home from the balance you owe on your mortgage. If the difference is a positive number, then make sure to either ask a bankruptcy attorney, or do your own research to look closely at your state’s equity exemptions.

The state exemptions also differ due to the how the state and its residents generate revenue. For example, in Texas there is a state exemption for livestock and crops, but you would not find anything like this in Rhode Island or New York because farming is not a major source of revenue. In Hawaii there is a specific exemption for fishing boats and nets, but in a landlocked state like Arkansas that sort of an exemption is unnecessary. The exemptions were created this way to give the most bankruptcy help possible to the citizens of each state, having a general list of exemptions would not have done this.

Sometimes the state bankruptcy exemption amounts differ because of the cost of living and median income. In Maryland, where the median household income is well above $60K the bankruptcy exemptions protect up to $6K in personal property. This is a vast difference from a poorer state like Alabama where the median income is much lower so the exemption amount for personal property is only $3K. Again, because these state exemptions are so specific, it is absolutely vital that you find a bankruptcy attorney who not only understands the different types of bankruptcy, but also understands how the different exemptions work with each type.

State bankruptcy exemptions are all unique, but so is your bankruptcy case.; in fact, knowing more about your state’s exemptions should give you confidence that there is protection available for your property.

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