Bankruptcy Exemptions

I was faced with an interesting question from a client this week.  Up until recently ago he lived in California.  For six years he has owned a condo in Utah.  Four months ago he moved to Utah and now lives in the condo.  He needs to file bankruptcy and wants to know which state's exemptions, Utah or California, he can use.  He wants to use California because their homestead exemption is $75,000 whereas Utah's is $20,000.

Section 522 of the Bankruptcy Code says that a person uses the exemptions in the state where he has had his domicile for the past 730 days (two years), unless the person hasn't lived in a single state for that time.  If, like this person, a debtor has lived in two or more states in the past two years, then he uses the exemptions in the state where he lived the longest portion of the 180 days immediately preceding the two year period.  This convoluted and confusing statute is part of the BAPCPA enacted in 2005 and its purpose is to prevent debtors from moving to states with more liberal exemption laws and then filing bankruptcy.

In this case, section 522 helps my potential client because he lived in California for the full 180 days prior to the two year period back to August 2009.  So he will get to claim the California exemption even on his condo in Utah.