730-Day Rule: Bankruptcy After Moving to Henderson, NV

Southwestern states are full of households that moved there to get out of California. California’s weather is great and the beaches are beautiful, but the cost of living is high, traffic is bad, and life can be difficult. Those who aren’t cut out for it might eventually make their way to Nevada, and more specifically, Henderson. But if they bring debt with them, there could be limitations to their ability to clear that debt through a chapter 7 or chapter 13 bankruptcy filing. Of course, that depends on what kinds of assets they wish to protect in a potential bankruptcy case. While bankruptcy can clear almost limitless amounts of debt, there are limitations to asset protection. Read on to learn more about how the 730-day rule could apply to someone struggling with debt who recently moved to Henderson from California. To schedule your free case evaluation with our Henderson bankruptcy firm, call 702-899-3328.

What Is the 730-Day Rule?

Depending on how familiar you are with the legal system, you may be aware that many types of cases require that a party meet a residency requirement for the case to proceed. If a party files before satisfying the residency requirement, their case could be dismissed or transferred. Under federal bankruptcy law, a person can generally file for bankruptcy in Nevada once they have lived here for most of the last 180 days, or about 6 months. But that is just the requirement to file here, not to use Nevada’s exemptions to protect assets in bankruptcy. Under the federal 730-day rule, a debtor must have lived in Nevada for 730 days, or 2 years, before filing to use Nevada’s bankruptcy exemptions. This creates a 1.5-year window in which a person can file for bankruptcy in Nevada but can’t use Nevada’s exemptions. During that window, the debtor generally must use the exemptions of the state where they lived for most of the 180 days before that 2-year period, which for many Henderson transplants is California. Nevada does not allow debtors to use the federal bankruptcy exemptions instead, and the previous state’s exemptions may come with their own restrictions. If those rules leave the debtor unable to use any state’s exemptions, federal law allows them to fall back on the federal exemptions.

Homeowners should also know about a separate rule. If a debtor acquired their home within 1,215 days, or about 3.3 years, before filing for bankruptcy, federal law caps how much home equity they can protect with the homestead exemption, no matter how generous the state’s homestead exemption is.

These waiting periods may seem long, but they might not be relevant to a potential bankruptcy debtor reading this article. If someone rents and doesn’t have other valuable personal assets, their car is probably their most valuable possession. It’s hard to get by in both California and Henderson without a personal vehicle. A bankruptcy trustee might not have any interest in pursuing an older vehicle that needs significant maintenance or repairs. But a newer vehicle in good condition can still fetch a hefty sale on the used car market. A vehicle could certainly be at risk if it can’t be protected by an exemption in bankruptcy. Nevada’s vehicle exemption and wildcard exemption can help protect a car, but only once the debtor meets the 730-day rule. Until then, a debtor should check if they can use their previous state’s exemptions to protect their car in bankruptcy before filing in Henderson.

The Automatic Stay: Why It May Be Worth It to File Now

It could be a huge inconvenience not to meet the residency requirement to use Nevada’s bankruptcy exemptions. But what might happen if a person who recently moved to Henderson puts off a bankruptcy filing could be much worse. Some debtors file for bankruptcy not for sheer volume of debt, but due to urgency created by collection efforts. A creditor lawsuit, wage garnishment, home foreclosure, or other collection action could be pending, and failure to stop it would make that person’s financial situation tremendously worse. But filing for chapter 7 bankruptcy or chapter 13 bankruptcy immediately activates the automatic stay, which halts most forms of debt collection. So is it worth it to file now? It will all depend on the form of impending collection and what types of assets would be left unprotected without satisfying the 730-day rule. This analysis would best be conducted by an experienced bankruptcy lawyer.

Chapter 13 When Assets Can’t Be Protected with Exemptions

Whether or not you can protect your assets with your previous state’s exemptions after a recent move will depend on that previous state’s rules for using its exemptions in bankruptcy. If no protections are available, the debtor should consider filing for chapter 13 bankruptcy over chapter 7 bankruptcy. In chapter 7 bankruptcy, there isn’t much getting around what happens to unprotected assets: they are seized by the bankruptcy trustee and sold. Creditors get most of the proceeds, although the trustee gets to keep a portion as their payment. While non-exempt assets can be relevant in a chapter 13 filing, the outcome isn’t the same.

Chapter 13 bankruptcy reorganizes debts into a payment plan rather than simply erasing them like in chapter 7 bankruptcy. However, there are benefits to this, such as the potential to keep non-exempt assets. These only affect how much the debtor potentially has to pay into their plan each month rather than disqualify them from filing for bankruptcy as a whole. This does have the potential to make a debtor ineligible for chapter 13 bankruptcy if they can’t afford their payment plan, but at least it creates an opportunity to save non-exempt assets.

Plan payments are based on how much disposable monthly income the debtor has. This is their net income minus mandatory expenses like rent or mortgage, a car payment, insurance payments, etc. They must have enough disposable monthly income to pay off secured debts, priority debts, and their bankruptcy costs during their payment plan to qualify. Unsecured debts are paid to the extent that the debtor can afford. The payment plan term depends on how the debtor’s household income stacks up to the state median household income for their household size. If household income falls below that level, a chapter 13 payment plan lasts 3 years. When the debtor’s household income is above the state median, their chapter 13 bankruptcy case will last 5 years. So if a debtor has non-exempt assets, their plan generally must pay unsecured creditors at least as much as those creditors would have received if the assets were sold in a chapter 7 case.

Whether You Moved Here Recently or You’ve Lived in Henderson Your Whole Life, Our Bankruptcy Team Can Assist with Clearing Debts for a Better Financial Future

Many people move to Henderson with dreams of a better financial future. But even after a move, it may take a little extra help to get back on solid footing. If you could benefit from both clearing debts and protection from creditors, bankruptcy could be that extra help you’re looking for. Don’t let up-front costs sway you from filing for bankruptcy with a skilled bankruptcy attorney in the Henderson area. Our firm offers free case evaluations by phone to get started. You may also qualify to file your case with no money down. You won’t know until you speak to a member of our team during your free phone consultation. Start planning your bankruptcy and learn more about everything you will gain from your chapter 7 or chapter 13 filing. This is a decision that should not be made in haste or without input from an experienced bankruptcy professional. You can make your decision with confidence by scheduling your free consultation by phone with a member of our Henderson bankruptcy team at 702-899-3328 for more.