In October 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act, or BAPCPA, went into effect. This new federal law tightened the requirements to file for bankruptcy, including the residency requirement debtors must meet to file in a particular state. Specifically, a debtor must reside in a state for at least two years before he is eligible to file a bankruptcy petition in that state and take advantage of its exemptions. However, if a debtor lived in more than one state during the prerequisite two-year period, the bankruptcy laws of the state where the debtor lived 180 days immediately prior to the two years will apply instead. By incorporating these stricter requirements, BAPCPA aims to reduce forum shopping among bankruptcy filers. This occurs when debtors move to a different state for the sole purpose of taking advantage of the state's favorable exemptions.
Residency Requirement Met
If you have lived in New York continuously for the past two years, you can file for bankruptcy in the state and use state exemptions. Exemptions allow you to protect certain property from seizure in Chapter 7 bankruptcy or from being included in the calculation of your disposable income in a Chapter 13 repayment plan. Exemptions are available under both state and federal laws, and New York allows you to choose which exemption list you would like to use. For example, you can exempt up to $22,975 of your home's equity using the federal homestead exemption or up to $150,000 using the equivalent state exemption.
Residency Requirement Not Met
If you have not lived in New York for a total of two consecutive years or lived in more than one state during the two-year period before bankruptcy, you cannot use New York's exemptions when you file for bankruptcy. Instead, you must use the exemptions of the state where you previously resided. Under BAPCPA, this is the state where you lived during the six months immediately prior to the two-year period leading up to the bankruptcy filing. For example, if you have only been living in New York for one year and lived in California for three years prior to that, you must use California's exemptions in your bankruptcy. This is because you have not lived in New York for the requisite two-year period and, under BAPCPA, California is your prior residence because you lived in the state for 180 days prior to the two years leading up to your bankruptcy filing. If you did not live in your prior state for the full 180-day period, the state will still qualify as your prior residence if you lived there for a majority of the 180 days -- 91 days or more.
On rare occasions, a debtor can use neither New York's exemptions nor the exemptions of his prior state of residence. This is because some states, like Virginia, prohibit use of their exemptions in another state's bankruptcy court. Debtors who find themselves in this predicament, in which no state exemptions are available to them, are permitted to use federal exemptions.