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November ABI Journal Article Examines Whether Bankruptcy-Specific State Exemptions Are Constitutional

Alexandria, Va. — While the Bankruptcy Code does not specifically authorize states to enact bankruptcy-specific exemptions, an article in the November ABI Journal found that a number of states have chosen to do so and have been upheld in the circuit courts. The Bankruptcy Clause in the U.S. Constitution grants Congress the power to establish uniform bankruptcy laws throughout the U.S., and the Supremacy Clause provides that laws that are passed by Congress are to be the supreme laws of the land, according to the article “Are Bankruptcy-Specific State Exemptions Constitutional?,” written by Heather M. Forrest of Jackson Walker LLP (Dallas). “With these two provisions in mind, the question becomes whether ‘a state may enact an exemption scheme that applies only to debtors in bankruptcy,’” Forrest writes. Forrest points out that Michigan has adopted two separate exemption statutes. Section 600.6023 exempts certain property from levy and sale by a judgment creditor, including a homestead not to exceed a value of $3,500. Section 600.5451, on the other hand, allows a debtor in bankruptcy separate exemptions, including a homestead exemption not to exceed $30,000 in value or $45,000 in value if the debtor or a dependent of the debtor is over age 65 or is disabled. The U.S. Court of Appeals for the Sixth Circuit recently upheld that legislation, finding that the state’s bankruptcy-specific exemptions are constitutional, according to Forrest. “While the Supreme Court has not yet been called upon to decide whether states have the authority to enact bankruptcy-specific exemptions, it is clear that the Sixth Circuit believes that this type of legislation is constitutional, and it is not alone,” Forrest writes. “The Fourth Circuit and the BAP [Bankruptcy Appellate Panel] for the Ninth Circuit have also issued rulings finding or indicating that these types of statutes are constitutional.” To obtain a copy of “Are Bankruptcy-Specific State Exemptions Constitutional?” published in the November edition of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at jhartgen@abiworld.org. ### ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.