Fourth Circuit avoids a result that would have left some debtors ineligible for any exemptions.

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Case Type:
Case Status:
17-1867 (4th Circuit, May 04,2018) Published
A debtor’s property exemptions can be derived from federal or state law, and the court must construe exemption provisions liberally in favor of the debtor and the exemption. The debtors’ domicile is determined under § 522(b)(3)(A) and if a debtor is possibly rendered ineligible to use any exemption due to state law, the extraterritorial application of state law is appropriate.
Procedural context:
The chapter 7 trustee objected to debtors’ exemptions and the bankruptcy court denied the objection and the trustee appeal to the district court which affirmed. The 4th Circuit affirmed reviewing de novo the district court’s disposition of an appeal from a bankruptcy court.
The debtors moved from Louisiana to West Virginia approximately 4 months prior to filing bankruptcy in West Virginia and they owed property in both states. The property in West Virginia included a checking account, two television sets, items of clothing, a wedding band, two firearms, and a well-used car all valued, subject to their claimed exemptions, at approximately $3,450. The debtors had not been domiciled in West Virginia for 730 days prior to the petition date and thus, the “hanging” paragraph of § 522(b)(3) applied pursuant to which, Louisiana was determined to be debtors’ domicile. Louisiana had opted out of the federal exemption scheme and application of Louisiana’s exemption scheme is not restricted to in-state residents. On Schedule C, the debtors claimed the property exempt under Louisiana state law. In arriving at its decision, the 4th Circuit considered the three potential interpretations of § 522(b)(3)(A) which are (1) the “anti-extraterritoriality” approach, (2) the “preemption” approach, and (3) the “state-specific” approach.
Niemeyer, King, Brinkema (King)

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