Want Bankruptcy Information - Bankruptcy Law and the States

By Deanna Mascle
Although federal bankruptcy law mainly regulates bankruptcies, the individual states can have specific guidelines for the process within their jurisdiction. States can typically choose to have their own rules that govern the types of exemptions that the debtor is allowed to keep after filing for a discharge of their debts. For instance, some states will allow debtors to keep their homes no matter how expensive or extravagant they are whereas other states will force the liquidation of property as an attempt to pay off the debts. Other variations include the types of debt that a debtor can discharge, although many of these are federally mandated without exception.

Florida bankruptcy law heavily favors debtors in regards to the property that they can retain. In fact, Florida has a reputation for being one of the most liberal states in the country for debtors to petition for a discharge of debts. The state government has elected to opt out of the federal regulations concerning the debtor's lawfully retainable property. According to Florida bankruptcy proceedings, you can keep more of your personal property during a bankruptcy than in any other state. As a result, many people who plan to file often move to Florida with their assets in order to take advantage of the state's lenient bankruptcy law.

To see a contrast in the how the bankruptcy law changes from state to state, look at the exemptions that the Maryland law allows. Maryland is stricter in regard to the debtor's assets that must be liquidated in a bankruptcy. For instance, a debtor who files bankruptcy in Maryland is only entitled to keep $500 worth of household goods and furnishings as well as $3,000 of cash in their bank accounts. Also according to Maryland bankruptcy law, debtors can only retain up to $2,500 worth of personal property and the rest must be sold or liquidated so the proceeds can go towards paying the creditors.

Not only do the states have differing laws that affect bankruptcy exemptions, but the exemptions and guidelines also pertain to the differences in the bankruptcy chapter that the debtor files. For instance, debtors who file for Chapter 7 bankruptcy have the option of having their debts completely discharged but their assets are typically liquidated to help repay the creditors. For a Chapter 13 bankruptcy however, debtors are placed on a repayment schedule and they can keep their homes and other personal property as long as they continue to make the required payments.

States have certain regulations that they require debtors to adhere to when they file for bankruptcy. As a result, some states end up being more lenient toward creditors while others tend to be more sympathetic to the debtors. This makes for situations where savvy debtors can spot loopholes in the system and use them to their financial advantage. That is why there is a need for federal bankruptcy law to be the ultimate jurisdiction for any bankruptcy petition filed in the United States. This helps to simplify situations in case questions or confusions arrive.


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