Right state to file a bankruptcy.
Many people facing debt problems may choose to move away from their home to a new area in order try to create a new environment for themselves away from their debt problems. These new places that people move to are often places where their relatives may live or areas where there is a Korean community with a high Korean population. However, if their situation does not improve after moving, they will eventually still be in financial distress and eventually consider filing bankruptcy. Those who have travelled to several states in the US within a short period of time may be surprised to find out the fact that they cannot file bankruptcy in the state they have recently moved to. That is what happened in the case of Mr. Lee, who visited our firm recently.
Mr. Lee was running a small Korean restaurant in California. However, there were too many similar restaurants in California and he was lucky if he could barely sustain decent business and he eventually started incurring monthly debt. Therefore, Mr. Lee decided to move to Texas where the Korean population was growing. Although he incurred a small amount of debt, it was not an issue paying back the amount as long as business was good. However, Texas was so different from California that it was not easy to adapt to the environment. Mr. Lee then moved to New York because he thought that there was no way that he was going to see his business life come to an end. Although he had relatives in New Jersey, he did not want to seek their help and he knew that he could make it in the restaurant business in New York since there were so many Koreans living there and Kpop and Korean pop culture was a popular trend. Nevertheless, Mr. Lee ended up incurring a huge amount of debt in New York. The competition in New York was so high that he had to close his restaurant after two years and two months when his debt level reached a peak high. He then moved to New Jersey to live with his relatives and he started incurring more credit card debt in order to support his family. From there on, calls from debt collection agencies started to flood in. After seven months of living in New Jersey, Mr. Lee finally came to us to file bankruptcy.
Mr. Lee had resided in New Jersey for seven months, two years and two months in New York, two years in Texas and four years in California. He was confused as to whether he should be filing bankruptcy in California where he had lived the longest, file in New Jersey where he was living now, or whether he would be able to pick and choose amongst the states he had lived in.
Although bankruptcy is governed by federal law, which state you file in makes a difference as well. For example, the type and amount of property that can you can keep when you file bankruptcy is different for each state as each state’s exemptions are different from other states. For instance, if you file bankruptcy in New York, you can protect anything ranging from $80,000 to $160,000 of value there is in your home under what is called the “homestead exemption”. You can also protect up to $600 of cash, and $4,425 of value in your car. However, in the neighboring state of New Jersey, there is no homestead exemption, and you can protect $1,000 in value in your car. You may, of course, opt to choose to use the federal exemptions, but it is still important to know what all your options are. If you have to file bankruptcy in a state that is far away from where you live, you may also be worried about any commute that you might have to make to court.
In the case of Mr. Lee, he was able to file bankruptcy in New Jersey as he had lived in the state for 180 days. However, since the period of residence in New Jersey was less than two years, the state exemptions available to him was New York, not New Jersey. We are careful in accurately determining which court you should file bankruptcy in and what state exemptions apply, to avoid the mistake of filing in the wrong court by rushing a bankruptcy filing.
Clients considering bankruptcy are in many unique situations. As such, it is important to speak to an experienced bankruptcy attorney who can give you the best legal advice that pertains to your particular situation. Should you have any questions about filing bankruptcy, please email us at mail@songlawfirm.com.
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Dongho Song Law Firm provides a free assessment of your bankruptcy potential.
If you would like to use this service, please contact us at mail@songlawfirm.com. Personal information obtained through this service is kept strictly confidential.