Most people in don’t realize that bankruptcy is under federal jurisdiction until they are in the middle of the proceedings. The Constitution dictates that Congress must enact uniform bankruptcy laws. Despite being under Federal jurisdiction the process will vary from state to state. However, the basics of bankruptcy laws were created by Congress and administered by the US Bankruptcy Court which happens to be federal.
Provisions Under State Law & the Means Test
Every state will have their own interpretations under the law despite the code originating with the federal government. Here is an example, if you want to file Chapter 7 you will now have to qualify under the means test. Here’s how the means test works, they will take the last six months of your earnings, divide it by 6 to get your monthly income. Then your monthly income is multiplied by 12 to calculate your annual earnings. Now to qualify under the means test you must make less than the median income for your state. For example if you make $50,000 per year and you live in California you will qualify, but if you live in Arizona you won’t.
Another area that differs greatly is when it comes to bankruptcy exemption laws. There is a standard federal exemption that you can use, or you can opt out and use the exemption laws in your state. In some states you are allowed to protect things you need for work, such as tools but other states will only allow an exemption of a few thousand dollars.
If you live in a rural area there are exemptions for farm equipment and claiming your home as a homestead is one of the more popular exemptions. Homestead exemptions still vary greatly from state to state. Homestead exemptions are typically attached to property values. States like Texas allow for an unlimited amount of equity in a home whereas smaller states will cap the equity and $25,000. Here is a video explaining the details of exemptions.
Working With an Attorney
Bankruptcy law is fairly complex and if you’re filing bankruptcy you should work with an attorney that specializes in bankruptcy law. They know the ins and outs of the statutes in your state where you file. It gives you the opportunity to go through the process knowing that you’re being protected.
Yes it is possible to file bankruptcy on your own, but much like divorce it isn’t in your best interest to do so. In 2005 there was an overhaul to the bankruptcy code and your information may be old and out of date. An attorney keeps up to date on all changes in the law and is in the best position to protect your interests.