The laws pertaining to bankruptcy in the United States are governed by the United States Constitution (Article 1, Section 8, Clause 4) which authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States.” Pursuant to this authority, Congress has indeed passed bankruptcy laws which are intended to apply equally to those who are seeking bankruptcy protection regardless of the state that they reside in.  In doing so, however, it included a provision that creates a big difference for filers based upon the state in which they reside.

The bankruptcy laws provide that each state is allowed to determine how much property an individual is allowed to keep when they file bankruptcy.  These laws are called “exemption” laws.  They spell out what property can be protected from creditors and vary greatly from state to state.

For instance, our law offices have filed bankruptcy petitions for residents of Mobile, Alabama; Pensacola, Florida and Biloxi, Mississippi.  Pensacola and Biloxi are only 120 miles apart.  Mobile is between the two.  A resident of Alabama filing in Mobile is able to claim a $5000 homestead exemption.  In other words, the Alabama resident can protect only $5000 of the equity in his home.  Meanwhile, a resident of Mississippi filing in Biloxi (an hour West of Mobile) is entitled to protect $75,000 of equity in his home – fifteen times as much as the Alabama resident.  At the same time, a resident of Florida filing in Pensacola (an hour East of Mobile) is entitled to an unlimited homestead exemption.  Assuming certain conditions are met, the Florida resident could protect a multi-million dollar home! There are also exemptions that pertain to personal property such as cars, furniture, etc.  These also vary greatly from state to state. Finally, the manner in which exemptions are applied can be different from court to court in the same state.  All bankruptcy judges and trustees don’t necessarily handle things in the same way.

As you can see, the state that a person lives in makes a big difference for people seeking bankruptcy relief.  This is why it is important to consult with a local experienced bankruptcy attorney who can help you understand the laws as they will apply to you.  Do not trust these decisions to someone at the other end of a toll free phone line.

Bond & Botes has offices conveniently located in Alabama, Mississippi and Tennessee.  We offer a free, no obligation and confidential consultation with an attorney experienced with the laws and practices in these areas.

Please let us know if we can be of assistance.

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