Bankruptcy is primarily governed by federal law. However, each state is given the opportunity to make bankruptcy rules for its citizens. State laws amplify the federal law in areas where federal law is silent or expressly defers to state law. The specific rules that the state formulate typically come in the form of state statutes and judicial precedents. Exemption is the most important type of state bankruptcy rule. Exemptions are rules that help debtors in determining what property they get to keep, in case they are filing a Chapter 7 bankruptcy, and how much they have to repay their creditors in case they go for a Chapter 13 bankruptcy.
Depending upon the state in which you file for bankruptcy, property exemptions may be governed by state or federal law. Some states mandate using state law for property exemptions. Whereas, others give the debtor an option to choose between federal and state law. For example, federal bankruptcy exemption is not available in Alabama. But in Alaska, a debtor may choose between federal or state bankruptcy exemptions.
State law also play an important role while making decisions about whether or not to file for bankruptcy and the type of bankruptcy best suited for the debtor. Therefore, state law plays an important role in many bankruptcy cases and the debtor should be aware of the state bankruptcy laws before filing for bankruptcy. We cannot generalize bankruptcy law across state lines.
Some bankruptcy-related information and law specific to your state can be found below.