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Potential Debtor Asks: Should I File Bankruptcy Before Moving to Florida?
A caller said he was about to move to Florida from Iowa and needed to file bankruptcy as soon as possible. He wanted to know if he would be better off filing bankruptcy in Iowa before he left or waiting until he established residence in Florida. Under the new bankruptcy law, it does not matter.
Regardless of which state he chooses to file bankruptcy his bankruptcy will be administered under exemption Iowa’s laws. If Iowa has elected to apply its state exemptions, then Iowa’s exemption laws will determine what assets are part of his bankruptcy estate. If Iowa has not elected to apply its state exemptions, this debtor’s bankruptcy will proceed under the default federal exemption system. In either event, the debtor will not be entitled to claim Florida exemptions even if he moves to Florida and establishes permanent residency in Florida before filing. Under the new bankruptcy law, this person would have to wait two years after coming to Florida to file bankruptcy under Florida’s exemption law. He could file bankruptcy in Florida, however, as soon as he establishes that Florida is his primary residence.
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida
August 30, 2006 in Planning Tips | Permalink
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Comments
Another interesting wrinkle in these situations occurs when the debtor's former state of residence limits the use of the state exemptions to residents only(e.g. Colorado). As a result, a debtor moving to Florida from one of these states cannot use the exemptions of either state because she is no longer a resident of the former state and but hasn't lived in FL long enough to use our exemptions. The debtor then is left with the federal exemptions (even though both states may deny the use of federal exemptions to "residents"...go figure). If the debtor would fare better under the former state's exemption laws than under the federal exemptions, she may be better off filing before moving to Florida.
Posted by: D. Lienhart | Aug 31, 2006 9:06:53 AM
Jonathan - I remember that during the debate over the new law there was a lot of discussion about Code changes that would impact exemption rules for Florida, with the homestead exemption being a target. What was the result of that debate about the Florida homestead exemption?
Here in Georgia, the homestead exemption is limited to $10,000 per person - one of the lowest in the nation. It is my understanding that the 2 years residential rule you discuss in your post was designed to eliminate forum shopping for bankruptcy.
Jonathan Ginsberg
Ginsberg Law Offices
Atlanta, GA
Posted by: Jonathan Ginsberg | Aug 31, 2006 9:05:51 AM
