Non-Uniformity of Exemption Laws When Filing For Bankruptcy

Non-Uniformity of Exemption Laws When Filing For Bankruptcy "Numerous individuals who file for bankruptcy today query the uniformity of bankruptcy laws. In accordance with the US Constitution, Congress is authorized to enact uniform bankruptcy laws throughout the United States. Each state has its own laws that affect a person's ability to file for bankruptcy. The bankruptcy code is interpreted differently by the state bankruptcy courts of various states. The court where an individual files for bankruptcy is a federal court, so each district court has the authority to determine the responsibilities involved in the administration of a bankruptcy filing. Since the passage of the BAPCPA in 2005, local district courts in every state have scrambled to determine how the new code should be implemented.The interpretation of the bankruptcy code can significantly affect the outcome of a bankruptcy proceeding. The interpretation by the District Court has been a continuing issue. Since states have the ability to interpret the law, some states believe that a debtor whose income is greater than the median should be promptly forced into a Chapter 13 bankruptcy with a five-year payment plan. While other states calculate a person's disposable monthly income differently, plan durations can vary widely. In fact, some individuals may qualify for Chapter 7 bankruptcy due to the interpretation of how disposable income is calculated.With this significant area of ambiguity remaining unresolved, states may choose to utilize federal bankruptcy exemption laws when no other exemptions are available. Some states use only one, while others use both. This allows states that use their own bankruptcy exemptions to strictly regulate the amounts of property that can be protected, such as the homestead exemption, which safeguards a family's residence. Under federal bankruptcy law, the homestead exemption is minimal and uniform throughout the nation. The state's allowed amounts to be deemed exempt are typically much higher because they are more closely aligned with the demographics of the location where the individual is filing for bankruptcy.Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the problem of non-uniformity, Congress attempted in the new law to prevent debtors from relocating to a state that would grant them higher exemptions for financial gain. Since the 2005 act went into effect, a debtor must have lived in the state in which they file for bankruptcy for at least two years prior to using the state's exemptions. A debtor may still relocate and file for bankruptcy in another state, but they must use the exemptions from their previous state of residence. This was intended to prevent those registering for bankruptcy from examining the exemption laws of other states with the hope of protecting more property. This seems like a tremendous amount of effort to save a few dollars while declaring bankruptcy. This demonstrates the complexity of the new bankruptcy code and the importance of having a local bankruptcy attorney guide you through the minefields. Even though there are still numerous faults in the code, Congress made the amendments with the best of intentions, attempting to eliminate habitual bankruptcy filing.
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