S. 2996 WOULD LIMIT HOMESTEAD EXEMPTION

On September 24^th, Senator Kohl (D-WI) introduced S. 2996, a stand-alone bill that would cap homestead-related exemptions in bankruptcy at $125,000 in the aggregate.

The bill titled the “Bankruptcy Abuse Reform Act of 2002” would amend section 522 to pre-empt higher state law exemptions in cases where the debtor elected the state law exemption scheme or was required to use the state law scheme because the relevant state had opted out of the section 522(d) federal exemption list. The $125,000 cap would apply to the aggregate of all exemptions claimed in the case for real or personal property used as a residence by the debtor or his/her dependants, interests in a cooperative that owns property used as a residence by the debtor or his/her dependants (a cooperative apartment), or a burial plot for the debtor or his/her dependants. Like the pending Bankruptcy Abuse Prevention and Consumer Protection Act of 2002, the cap would not apply to an exemption claimed by a family farmer for his/her principal residence. However, unlike the larger reform bill, this cap would be absolute and would not provide exceptions for debtors who had lived in the homestead for a lengthy period of time.

Prof. G. Ray Warner, ABI Resident Scholar, Professor of Law at the University of Missouri-Kansas City