You may have heard about changes in the bankruptcy code a while back and wondered what it meant or how the changes would affect someone filing for bankruptcy. In general, bankruptcy laws have been fairly straight forward, with the small variations between state laws.
Federal vs. State
The federal bankruptcy code provides a uniform standard for anyone seeking bankruptcy protection. Filing for Chapter 7, Chapter 13 or Chapter 11 bankruptcy means that the case will be filed with a federal court and adhere to the federal bankruptcy laws. This means that the laws set forth by the federal bankruptcy court govern the bankruptcy proceedings such as whether the case is dismissed or discharged. Issues such as liens, wage garnishments and foreclosures are usually left to be managed by the state laws in a bankruptcy case.
State laws apply in any bankruptcy filing and are generally used to determine property rights. This is most commonly found in the differences in bankruptcy exemption laws, which determines the assets that will protected from liquidation during bankruptcy. The amount and type of assets that are exempt from bankruptcy varies by state and may be more or less beneficial than claiming the federal exemption in a bankruptcy case.
Generally, state exemption laws are more forgiving than federal exemption laws. The federal exemption allows for a person’s homestead and personal items to be exempt from liquidation, but is generally limited to an amount that may not prevent a person from losing their home to foreclosure or personal items of value; whereas some state exemption laws allow for a person’s homestead to be completely protected from foreclosure during bankruptcy.
For more information about state bankruptcy exemptions, visit:http://www.legalconsumer.com/bankruptcy/laws/