Cite as: Keith M. Lundin, Lundin On Chapter 13, § 48.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
An insightful bankruptcy lawyer from Florida reduced the exemption provisions of BAPCPA to this essence: “They wanted to deal with Movers, Converters and Bad Guys.”1 During the years of run up to BAPCPA, a consistent theme was the media-perfect image of a wealthy debtor retreating to Florida or Texas to “take advantage” of a generous homestead exemption. Of course, it has always been true that state legislatures across the country don’t agree about how much value a homesteader should be allowed to withhold from the clutches of creditors. It ranges from almost nothing2 to almost everything.3
There was much congressional debate about homestead exemptions in 1978, and the compromise that emerged in the Bankruptcy Code was a list of federal exemptions somewhere between the extremes of the states. The compromise included that states could “opt out”4—pulling the federal exemptions off the table for debtors filing in that state. Not unexpectedly, most states opted out of the federal exemptions.
What a difference a quarter century makes. In 2005, BAPCPA attacked the fundamental idea that a homestead exemption is a safety net defined by state legislatures. BAPCPA created nationwide limitations on exemptions for debtors who have “misbehaved” in certain ways.5 BAPCPA awkwardly complicates the control over exemptions a debtor can exercise by moving to a state with generous exemptions.6 There are new limits on the timing and extent to which a debtor can transfer assets into a form that will be exempt.7
But the architects of BAPCPA were not all of one mind. There are starkly contrasting provisions of BAPCPA that generously define new exemptions in retirement accounts.8 There are new exclusions from property of the bankruptcy estate that broadly expand the property a debtor keeps without claiming an exemption.9
Consistent with much of the rest of BAPCPA, the drafters of the new exemption provisions didn’t keep both eyes on the road. Unintended consequences and unexpected results characterize the exemption amendments to the Code.
Lien avoidance under § 522(f)10 received too much attention in BAPCPA. In an almost humorous display of skill-less draftsmanship, BAPCPA convoluted the items of household goods that a debtor can relieve of liens that impair exemptions.11
At this writing, there is one Interim Rule that affects practice and procedure with respect to exemptions.12
1 Patricia Redmond, an attorney with Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., at the ALI-ABA Course of Study on New Bankruptcy Legislation in Boston, Massachusetts, on July 21, 2005.
2 New Jersey, Pennsylvania and Rhode Island have no specific homestead exemptions.
3 See, e.g., Fla. Const. art. X, § 4(a)(1); Kan. Const. art. 15, § 9; Iowa Code § 561.16; Texas Const. art. 16, § 50; S.D. Const. art. XXI, § 4.
4 See 11 U.S.C. § 522(b)(1).
5 See 11 U.S.C. § 522(c), (o), (p) and (q), discussed in § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA.
6 See 11 U.S.C. § 522(b)(3), discussed in § 406.1 [ New Domicile Rules ] § 48.6 Domicile Rules after BAPCPA.
7 See 11 U.S.C. § 522(o) and (p), discussed in §§ 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA and 408.1 [ Timing and Procedure Considerations ] § 48.5 Timing and Procedure Considerations Added by BAPCPA.
8 See 11 U.S.C. § 522(n), discussed in § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA.
9 See 11 U.S.C. § 541(b)(5)–(8), discussed in §§ 403.1 [ Property of the Chapter 13 Estate—New Ins and Outs ] § 46.2 Property of the Chapter 13 Estate—Changes by BAPCPA and 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA.
10 See § 49.1 Available in Chapter 13 Cases, § 49.2 Procedure for Lien Avoidance, § 49.3 Limitations on Lien Avoidance, § 49.4 Section 522(f) after BAPCPA: Household Goods Corrupted and § 49.5 Protecting Lienholder after Lien Avoidance.
11 See 11 U.S.C. § 522(f)(4), discussed in § 409.1 [ Section 522(f) after BAPCPA: Household Goods Corrupted ] § 49.4 Section 522(f) after BAPCPA: Household Goods Corrupted.
12 See Interim Bankr. R. 4003, discussed in § 408.1 [ Timing and Procedure Considerations ] § 48.5 Timing and Procedure Considerations Added by BAPCPA.