Which State's Exemptions Apply To Bankruptcy

I recently read about a court decisions which illustrates the difficulty in determining what exemption laws apply when a debtor files bankruptcy under the new bankruptcy law. In this case, the debtor filed for bankruptcy in Florida after moving from Colorado.. The debtor properly filed in Florida because he was a Florida resident on filing date. The debtor initially claimed exemptions under Colorado law because he had not resided in Florida for two years. However, according the Colorado’s state constitution only Colorado residents are eligible to claim that states’ bankruptcy exemptions. Florida has no similar constitutional provision.

The court held that this debtor could not claim bankruptcy exemptions of either Florida nor Colorado. He was unable to claim Florida exemptions because he had not lived in Florida for two years, and he could not claim Colorado exemptions because of the constitutional rule. The court decided that by default the Bankruptcy Code’s federal exemptions would apply. See, In re Underwood from Northern District of Florida decided in 2006.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida