Many people filing bankruptcy today question the uniformity of the bankruptcy laws. In the US Constitution, Congress was authorized to create laws that were uniform, in regards to bankruptcy, throughout the entire United States. Every state still has its own laws that have an impact on someone filing for bankruptcy. There are variations of the federal law on how the different states bankruptcy courts interpret the bankruptcy code. The court that an individual files for bankruptcy in is a federal court, so each district court has the ability to dictate roles on how a bankruptcy filing is administered. Since the passing of the BAPCPA of 2005, local district courts in every state have been scrambling to try to attempt to interpret how the new code should be administered.
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The interpretation of the bankruptcy code can make a huge difference on the outcome of a bankruptcy case. It's been an ongoing issue on the interpretation by the District Court. Since states have the ability to interpret the law, some states feel that a debtor that is above the median income should immediately be pushed into a Chapter 13 bankruptcy with a full five-year payment plan. While other states calculate an individual's disposable monthly income differently, the plan length might be totally different. In fact, some individuals might even qualify to file Chapter 7 bankruptcy because of the interpretation of how to calculate disposable income.
With this large gray area not resolved, states can decide to use the federal bankruptcy exemption laws when no other bankruptcy exemptions are available. Some states use one or the other and some use both. This states that use their own bankruptcy exemptions can closely regulate amounts of what can be protected such as the homestead exemption, which protects a family's home. Under the federal bankruptcy law and the homestead exemption is minimal and is generic to the entire country. Generally speaking, the state's allowed amounts to be considered exempt is usually much higher because it works more closely with the demographics of where the individual is filing bankruptcy.
Since the passing of the BAPCPA and the non uniformity problem, in the new law, Congress attempted to keep debtors from moving to a different state that would allow them higher exemptions for the reason of financially benefiting them. When the 2005 act went into effect the debtor must reside in the state in which they live for two years before they can use the bankruptcy exemptions of that state. Although, a debtor can still move and file bankruptcy in another state, but they have to use the exemptions of the previous state in which they lived. The intention behind this was to stop those filing for bankruptcy to look at the exemption laws of other states and move with the idea of being able to protect more property. This seems like an awful lot of work to save a few bucks while filing bankruptcy. This shows the complexity of the new bankruptcy code and how it's important to have bankruptcy attorney from your area help you navigate the landmines. The Congress had good intentions, trying to eliminate habitual bankruptcy filing, when they made the changes to the code even though there are still many flaws.
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