Wednesday, January 22, 2014

BAPCPA's Exemption Provisions Do Not Violate Uniformity Requirement

In the case of In re Urban, ___ B.R. ___, 2007 WL 431570 (Bkrtcy. D. Mont.), Judge Kirscher held that BAPCPA's exemption provisions, which may require a debtor to claim the exemptions of a state other than that in which is he presently domiciled under certain circumstances, do not violate the US Constitution's Bankruptcy Clause's uniformity requirement.

The Court's inquiry focused on whether the amendments made to section 522(b)(3) by BAPCPA, which in some circumstances requires the extraterritorial application of the exemption laws of a state other than that of the debtor's present domicile, violate the uniformity requirement that appears in the US Constitution at Article I, Section 8, Clause 4. The Court noted that it was previously well-settled that the right of the states to opt out of the federal exemptions does not violate the uniformity requirement. In re Sullivan, 680 F.2d 1131 (7th Cir. 1982). The Court also noted that it was held early on that the uniformity requirement is "georgraphic", that is the laws passed on the subject must be uniform throughout the United States but that uniformity is geographical and not personal. Hanover National Bank of the City of New York v. Moyses, 186 US 181 (1902).

The Supreme Court in Moyses applied this requirement by holding that a bankruptcy statute passes constitutional muster if the bankruptcy law treats the trustee, as a hypothetical judicial lien creditor, in the same fashion in the bankruptcy case as he would be treated outside of the case under state law. The Moyses Court also provided "additional language" that the general operation of the law is uniform although it may result in certain particulars differently in different states.

Judge Kirscher found that section 522(b)(3) as amended by BAPCPA does not violate the uniformity requirement. The Court based its holding on the "additional language" in Moyses coupled with language contained in later US Supreme Court decisions which held that Congress has the power to take into account differences that exist between different parts of the country and to fashion legislation to resolve geogrphically isolated problems.