§ 48.5 — Timing and Procedure Considerations Added by BAPCPA

Revised: July 14, 2007

[1]

As detailed above,1 several of the new exemption rules enacted by BAPCPA contain temporal limitations and conditions. For example, the new domicile determination begins with consideration of where the debtor lived for 730 days before the petition and then focuses on the period between 730 and 910 days before the petition.2 One new limitation on homestead exemptions is measured by interests in property acquired by the debtor in the 1,215 days before the petition.3 There will be Chapter 13 cases in which filing sooner or later will dramatically affect the exemptions available to the debtor.

[2]

At this writing, the Interim Rules make two changes with respect to the timing and procedure for claiming and objecting to exemptions in Chapter 13 cases. Interim Rule 4003(b)(1) amends the time within which an objection to exemptions must be filed, changing the phrase “only within 30 days after the meeting of creditors” to the phrase “within 30 days after the meeting of creditors.”4 Elimination of the word “only” is explained by the Committee Note as necessitated by the enactment of new § 522(q).5

[3]

Mentioned above,6 § 522(q) adds a complexly worded new limitation on homestead exemptions when the debtor has been convicted of a felony or owes a debt arising from violation of the securities laws, civil RICO and criminal acts, intentional torts or willful or reckless misconduct that caused serious physical injury or death in the five years before the petition. In Chapter 13 cases, new § 1328(h) prohibits granting a discharge unless the court finds “no reasonable cause to believe” that § 522(q)(1) may be applicable to the debtor and there is “pending” any proceeding in which the debtor may be found guilty of a felony or liable for a debt of the kind described in § 522(q)(1)(A) or (B).7

[4]

This strangely worded new obstacle to entry of discharge in Chapter 13 cases creates procedural problems. New § 1328(h) requires the bankruptcy court to make the “no reasonable cause to believe” finding “not more than 10 days before the date of the entry of the order granting the discharge.”8 This timing instruction demands new timing and procedures for objections to exemptions based on § 522(q). Accordingly, Interim Rule 4003(b)(2) contains this new provision: “An objection to a claim of exemption based on § 522(q) shall be filed before the closing of the case. If an exemption is first claimed after a case is reopened, an objection shall be filed before the reopened case is closed.”9

[5]

Because the crimes and misconduct described in § 522(q) are uncommon, perhaps most practitioners will complete their professional careers without having to sort out how §§ 1328(h) and 522(q) and Interim Rule 4003(b)(2) will work in a Chapter 13 case. Chapter 13 debtors become entitled to a discharge before the bankruptcy court closes the case. If an objection to exemption under § 522(q) can be filed anytime before closing of the case, how can the finding required by new § 1328(h) within 10 days of discharge be conclusively resolved before the Chapter 13 case is closed? In Chapter 13 cases, perhaps the limitation on objections to exemption under § 522(q) should have been fixed before 10 days before the last payment is due under the confirmed plan.

[6]

None of this discussion adequately explains why the Advisory Committee on Bankruptcy Rules struck the word “only” in Interim Rule 4003(b)(1). With respect to all objections to exemption other than under new § 522(q), there is no aspect of BAPCPA cited by the Committee to explain a retreat from the strict rule that objections to exemptions can only be filed within 30 days after the meeting of creditors. Some years ago, the U.S. Supreme Court addressed the 30-day limitation in Bankruptcy Rule 4003(b)(1) and concluded that property claimed exempt by a debtor is beyond attack absent objection within the strict 30-day limitation in Bankruptcy Rule 4003(b).10 Changing the wording of Bankruptcy Rule 4003(b) without statutory imperative could be misinterpreted to invite reconsideration of the strict time period in the former Rule.


 

1  See §§ 406.1 [ New Domicile Rules ] § 48.6  Domicile Rules after BAPCPA and 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3  Exemptions and Exemption Limitations Added by BAPCPA.

 

2  11 U.S.C. § 522(b)(3), discussed in § 406.1 [ New Domicile Rules ] § 48.6  Domicile Rules after BAPCPA.

 

3  See 11 U.S.C. § 522(p), discussed in § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3  Exemptions and Exemption Limitations Added by BAPCPA.

 

4  Interim Bankr. R. 4003(b)(1).

 

5  The Committee Note to Interim Rule 4003(b) reads in full:

Subdivision (b) is amended to reflect the 2005 addition of subsection (q) to § 522 of the Bankruptcy Code. Section 522(q) imposes a $125,000 limit on a state homestead exemption if the debtor has been convicted of a felony or owes a debt arising from certain causes of action. Other revised provisions of the Bankruptcy Code, such as § 727(a)(12) and § 1328(h), suggest that the court may consider issues relating to § 522 late in the case, and the 30-day period for objections would not be appropriate for this provision. A new subdivision (b)(2) is added to provide a separate time limit for this provision.

 

6  See § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3  Exemptions and Exemption Limitations Added by BAPCPA.

 

7  See 11 U.S.C. § 1328(h), discussed in § 547.1 [ Delay of Discharge: § 522(q)(1) and Pending Proceedings ] § 156.6  Delay of Discharge: § 522(q)(1) and Pending Proceedings.

 

8  See 11 U.S.C. § 1328(h), discussed in § 547.1 [ Delay of Discharge: § 522(q)(1) and Pending Proceedings ] § 156.6  Delay of Discharge: § 522(q)(1) and Pending Proceedings.

 

9  Interim Bankr. R. 4003(b)(2).

 

10  See Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992). See also § 49.2 [ Timing and Procedure ] § 48.4  Timing and Procedure.