Non-Domiciliary Entitled to Claim Federal Exemptions

In the pre-BAPCPA decision of In re Arispe, 289 B.R. 245 (Bankr.S.D.Fla.)(Mark, C.J.), the court held that a debtor who is a resident in Florida but not a domicile of Florida is entitled to claim the Section 522(d) federal exemptions as the Florida opt-out statute only applies to those domiciled in Florida.

The debtor was resident of Florida but not a domicile of Florida or any State as he was neither a U.S. citizen nor a permanent resident of the U.S. and therefore not able to legally form the intent to remain permanently which is an element of domicile. The Trustee argued that the Florida opt-out statute precluded the Debtor from utilizing the section 522(d) Federal exemptions. The Florida opt-out statute provides that residents of Florida are not entitled to utilize the federal exemptions provided in section 522(d). Florida Statutes, Section 222.20.

The court held that the “point of departure” in this analysis is Section 522(b) and not the Florida opt-out statute. The court noted that Section 522(b)(1) allows a debtor to utilize the federal exemptions “unless the State law that is applicable to the debtor under paragraph (2)(A)….specifically does not authorize..” Paragraph (2)(A) triggers reference to the State law at the place at which the debtor’s domicile was located during the 180 days prior to filing or the greater part of the 180 day period. Since the Debtor was not domiciled in Florida or any State during the 180 days prior to filing of the petition, reference to Florida or any other State’s opt-out is not initiated to not authorize the debtor to utilize the exemptions of Section 522(d) Federal Exemptions.

The Arispe case was subsequently followed in In re Goldsmith, 2003 WL 295690 (Bkrtcy.S.D.Fla.)(Cristol, J.).

It may be noted that a new provision added by BAPCPA to Section 522(b) may have been inspired by the Arispe decision. New Section 522(b) hanging paragraph provides that “If the effect of the domiciliary requirement under subparagraph [3](A) is to render the debtor ineligible for any exemption, the debtor may elect to exempt property that is specified under subsection (d).”

Jordan E. Bublick, Attorney at Law, Practice Limited to Bankruptcy Law, Board Certified Specialist in Consumer Bankruptcy Law (American Board of Certification), Member of the Florida Bar since 1983

Battle: Florida Opt-Out Statute Not Applicable to Non-Resident

In In re Battle, ___ B.R. ___, 2006 WL 3702734 (Bkrtcy.W.D.Tex.)(Lief, J.), the debtor filed for chapter 13 relief in Texas. Since she had lived in more than one state during the 730 day period preceding the bankruptcy filing, per section 522(b)(3)(A) the applicable exemption law is that of state where the debtor was domiciled longest for the 180 day period prior to the 730 day period. The court held that since the debtor had “resided” [sic] in Florida for the entire 180 day period, the exemption laws of Florida apply.

The issue before the court was whether the debtor must use Florida exemption laws or may elect to use the federal exemptions of section 522(d). The trustee aruged that since Florida is an opt-out state, the debtor was not allowed to use the federal exemptions.

The court held that the debtor was allowed to claim the federal exemptions since the Florida opt-out statute by its own terms applies only to Florida “residents.” The court reasoned that since the debtor was not a resident of Florida on the filing date, the Florida opt-out statute did not bar the debtor from claiming the federal exemptions. Section 222.20, Florida Statutes (the opt-out statute) provides that “residents of this state shall not be entitled to the federal exemptions provided in s. 522(d) of the Bankruptcy Code of 1978..” The court noted the holding in In re Schulz, 101 B.R. 301 (Bankr.N.D.Florida1989).

There is a line of cases that would appear to give strength to the position opposite to that of the Court’s ruling. See e.g. In re Arrol, 207.B.R. 662 (Bankr.N.D.Calif.1997), In re Drentell, 403 F.3d 611 (8th Cir. 2005).

Furthermore, the court may not have given sufficient emphasis to the structure of section 522(b) and given a misplaced position to the Florida opt-out statute in the stautory scheme and structure of 522(b). It is also unclear why section 222.20, Florida Statutes refers to “residents of this state” as section 522(b) only refers to “domicile” which is a similar but different concept. The court’s logic may be puzzling, as section 522(b)(3) directed the debtor to use the applicable law of the particular 180 day state. Section 522(b)(3) inherently contemplates that the debtor will not be a domicile of that state any longer, but nonetheless directs the debtor to use its law. Furthermore, if the Florida legislature had properly used the word “domiciles” instead of “residents” in section 222.20, it is unclear whether the court could have reached the same result.

Jordan E. Bublick, Attorney at Law, Practice Limited to Bankruptcy Law, Board Certified Specialist in Consumer Bankruptcy Law (American Board of Certification), Member of the Florida Bar since 1983

BAPCPA’s Exemption Provisions Do Not Violate Uniformity Requirement

In the recent 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.

Jordan E. Bublick, Attorney at Law, Practice Limited to Bankruptcy Law, Board Certified Specialist in Consumer Bankruptcy Law (American Board of Certification), Member of the Florida Bar since 1983