Is Bankruptcy Different From State to State?

For individuals facing difficult financial circumstances, bankruptcy is a common solution. However, before moving ahead, it’s important to understand more clearly what it entails and what it means for you. One of the most common questions about bankruptcy is whether it is different from state to state, or whether the same laws, regulations and stipulations apply everywhere.

This is actually a two-part answer. First, the overall, basic tenants of filing bankruptcy and its different chapters and classifications is handled by federal law. That means that the actual laws which govern bankruptcy are the same everywhere.

However, from there, state laws then have an impact, largely and most importantly in the area of the types of exemptions that you are eligible for.

Exemptions are specific types of property that you are able to retain. In most cases, individuals will keep most or all of their property.

One of the best examples of the differences between bankruptcy in Maryland, DC and Virginia, for instance, is the homestead exemption. In Maryland, it’s currently set at $22,975, while in Virginia, it’s a meager $5,000, although it can be doubled for married couples. In the case of the District of Columbia, it’s unlimited. Clearly, things are handled quite differently from one local to the next which has a huge bearing on you, your finances and your property.

Additional factors which may change from state to state include whether or not married couples get to double their exemptions, and whether or not there is a wildcard exemption, and to what to degree. A wildcard exemption, for instance, provides for a specific value of additional property not exempted elsewhere to be applied.

States also control whether or not they allow individuals to use the federal bankruptcy exemptions in place of their own state’s exemptions. They do not have to do this. For instance, in the state of Maryland, generally you are not allowed to use the federal bankruptcy exemption and must use the state’s.

It’s important to work with an attorney who is familiar with your own state’s bankruptcy laws and exemptions, and how they apply to your circumstances. Additionally, if you have recently moved, it’s essential to know how that affects bankruptcy in your state. Always consult with an experienced attorney in your local area who can guide you through the process, answer all of your questions about bankruptcy in your state, and ensure you’re making the right decisions.