- Sixth Circuit Court of Appeals File Name: 12a0274p.06
- AFFIRMING the ruling of the Bankruptcy Court for the Western District of Michigan, the Sixth Circuit Court of Appeals held Michigan's bankruptcy-specific state exemption law was constitutional under the Bankruptcy Clause and Supremacy Clause of the Constitution. The ruling effectively reverses a decision by the Sixth Circuit Bankruptcy Appellate Panel.
- Procedural context:
- The Bankruptcy Court for the Western District of Michigan overruled the objection of Steven Schafer's Trustee (Richardson) to the use of Michigan's bankruptcy-specific homestead exemption. The Trustee appealed to the Sixth Circuit BAP, which allowed the State of Michigan to intervene, but reversed the Bankruptcy Court, finding the bankruptcy-specific Michigan statute (600.5451) unconstitutional as being outside the scope of Congress' delegation of concurrent jurisdiction over exemptions to the states. The State of Michigan appealed to the Sixth Circuit Court of Appeals, which affirmed the Bankruptcy Court decision.
- Michigan law allows bankruptcy debtors to use the federal bankruptcy exemptions (11 U.S.C. Sec. 522(d)), the general Michigan exemptions (Mich. Comp. Laws Sec. 600.6023), or exemptions available only to debtors in bankruptcy (Mich. Comp. Laws Sec. 600.5451). The federal homestead exemption is $21,625, the general state exemption is $3,500, and the bankruptcy-specific exemption is $30,000 (or up to $45,000 based on age or disability). Debtor Schafer claimed the bankruptcy-specific exemption in his residence after filing a Chapter 7 bankruptcy in 2009. His Trustee objected, arguing the bankruptcy-specific exemption was unconstitutional under the Bankruptcy Clause and Supremacy Clause of the Constitution. The Bankruptcy Court found the Michigan law constitutional under prior Sixth Circuit precedent - Rhodes v. Stewart, 705 F.2d 159 (1983) - and Congress' delegation of power under Sec. 522(b)(2). The Bankruptcy Court ruling was contrary to two prior opinions from the Bankruptcy Court for the Western District of Michigan, and the Trustee appealed to the Sixth Circuit BAP. After allowing the State of Michigan to intervene, the BAP reversed the Bankruptcy Court on the ground that the power to create a bankruptcy-specific exemption statute was outside the power Congress delegated to the states regarding exemptions. The State of Michigan appealed to the Sixth Circuit. The Sixth Circuit reiterated several concepts such as states having concurrent jurisdiction over bankruptcy matters, including the ability to pass bankruptcy-related laws, as long as they were not "inconsistent with or contrary to federal laws." The Sixth Circuit also held that Sec. 522(b) implicity allowed states to preempt federal exemption laws and create their own exemption schemes. The Sixth Circuit examined the uniformity provision of the Bankruptcy Clause and held that a uniform process for treatment of debtors and creditors, rather than a uniform outcome was all that was required. The Sixth Circuit also followed opinions by the Fourth Circuit and Ninth Circuit BAP which upheld bankruptcy-specific exemptions in light of Supremacy Clause challenges. Applying a conflict preemption framework, the Sixth Circuit held that Michigan's law did not conflict with the purpose of the Bankruptcy Code.
- Cole, Clay and Mattice (District Judge for E.D. Tenn.); Opinion by Cole
Church Joint Venture, L.P. v. Earl Blasingame
Summarizing by Amir Shachmurove
3202 in the system
2 Being Processed