While you can file bankruptcy in San Diego so long as you have resided in California for the greater part of the last 180 days, you will not necessarily get to utilize California's very generous set of exemptions to protect your home, cars, or other assets when you file for bankruptcy. Federal law creates a residency requirement for determining which states exemption laws will apply to your bankruptcy case. California has a rather generous set of exemptions, as compared to many other states. Some states have harsh exemption laws that only allow you to keep a small fraction of what the California exemptions allow you to keep. For example, some states allow bankruptcy filers to have not more than $150 in a bank account and some states do not allow you to keep any money at all. In California, under certain circumstances, you can keep $10,000 – $20,000 in a bank account when you file for bankruptcy. Hence, an experienced bankruptcy lawyer will determine from the outset of representation which state's exemption laws apply.
Residency Requirement for Exemptions In Bankruptcy In San Diego
For many years, people would move to California and file bankruptcy in San Diego in order to take advantage of California’s generous set of exemptions. In an effort to curtail what was perceived as abuse of the Federal bankruptcy system, in 2005 the bankruptcy laws were amended to set forth a residence requirement. Under the residency requirement, your exemptions are determined under the laws of the state where you have continuously resided for a full two-year period prior to the date that you filed for bankruptcy. Residence must be continuous, in one state. If you have lived in more than one state in the last two years, then a different rule applies.
Residence in More than Once State
If you lived out of state for the last two years and just moved to San Diego, then you will not be able to use California’s generous set of exemptions until you have lived in California for at least two years. This is because if you have lived in more than one state during the last two years, then Federal law provides an awkward rule: your exemptions are determined by the laws of the state where you resided during the 180 period that is immediately prior to the last two years. So, for example, if you lived in San Diego for the past year and you lived out of state for the year before that, then you have to look back to where you lived in the 6-month period before the last two years. That will determine the state’s exemption laws that apply to your bankruptcy in San Diego.
All States Have Exemption Laws
The mere fact that another state’s exemption laws apply will not necessarily be detrimental to your case. All states have exemption laws, and you may find that the exemption laws of another state are sufficient to protect all of your assets. What is critical, is that before filing bankruptcy in San Diego, if you have lived in more than once state during the last two years, you consult with an experienced lawyer and discuss what exemption laws will apply to your case and what is the best course of action to protect all of your assets.
Out of State Expertise
The legal expertise of many San Diego lawyers does not extend past the legal universe of California law; not all San Diego lawyers will understand the exemption laws of other states. But an experienced bankruptcy lawyer will have a firm understanding of how the exemption laws of all the 50 states work and will be able to give you sound legal advice even if you have resided in multiple states over the past few years. Also, when residence is an issue, your lawyer will typically consult with another lawyer from the state whose exemption laws apply to confirm the lawyer's understanding of the laws of that state and verify that your assets will be protected.