In truth, there are several answers to this question. The one I want to focus on today has to do with what exemption law applies in your case. So now you are asking, what is exemption law and why does it matter? In a nutshell, exemption laws determine what property you might lose and more importantly, what property you get to keep when you file bankruptcy.
Bankruptcy law in this respect is a hybrid of state and federal law. In Arizona, where we practice, under most circumstances individuals have to use Arizona exemptions. Without getting overly technical, Arizona does not allow a debtor to pick and choose between state and federal exemption law. If Arizona is the applicable state then we are using Arizona exemption law.
However, the fact that you live in Arizona when you file your case, does not mean that Arizona is the applicable state. In fact, if you have not lived in Arizona for 2 years prior to the date of filing, the applicable state is somewhere else. There is a technical process you must go through to determine what the applicable state is. Once you make that determination, only then can your attorney determine what exemption law is available to you. It makes a difference. For example, if you are forced to use Arizona exemptions, you are limited to $300 of cash on hand on the day of filing (for a joint filing). However, if federal exemptions are available, and you do not need to use the homestead exemption, you can use a federal wildcard exemption and keep more than $20,000 of cash. That is a major distinction. Your attorney needs to know where you have been and for how long so that if he needs to speed up the filing of your case to protect available exemption law he can do so.
Long story short, you need to let your attorney know where you have been and for how long when you meet with him or her for the first time. It could mean getting a better fresh start. If you have some time on your hands, visit www.exemptionsexpress.com to get a look at the complexities of which law applies in a bankruptcy case. Or, visit our website at www.bankruptcylawyeraz.com and come see us in person.
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