Bankruptcy

Amici Bankruptcy Professors Pottow & White "Win" on BAPCPA 11 U.S.C. 522(p)

By John Pottow

Yes, self-serving, but What Is To Be Done?

A few years ago, my Michigan Law colleague Jim White (J.J. White to some) -- who has guest blogged for Credit Slips -- and I picked up a BAPCPA case trickling though the Ninth Circuit.  (OK, I started it and then bugged him about it.)  We got together and wrote a brief to file as amici and sent it off dutifully to CA9 back in 2007.  Then we forgot about it (even missed oral argument).  Until yesterday, that is, when we saw that the Ninth Circuit handed down the decision reversing the bankruptcy and district court judgements that had so exercised us.

Here's the link: Greene v. Savage (In re Greene) (9th Cir. Oct. 2, 2009).  Summary follows the break.

The issue was whether Congress intended the "mansion arbitrage" proscription of 11 U.S.C. 522(p) to apply to intrastate residents who purchased their land before the 1215-day lookback period but never bothered to file a homestead declaration until within the lookback period.  Some aggressive trustees had convinced a few courts that the homestead declaration -- not the underlying property interest thus homesteaded -- was the relevant "interest in property" improperly "acquired."  Not so, we said: property is "acquired," but a homestead is a "classification" or "status" of property that is "declared" or "claimed" (but not, at least in this context, "acquired").  We thought we had the clear textualist position, but the learned appellate judges were more circumspect -- ultimately agreeing with our position but conceding that the language presented some ambiguity in need of further reliance on legislative history and so on.

For what it's worth, we also contended we had the common sense position most consonant with the legislative history.  BAPCPA, for good or bad, was trying to block people from moving across state lines to indulge in high homestead exemptions on the eve of bankruptcy (i.e., "mansion arbitrage").  So 522(p)(1) says that if you acquired your property within 1215 days of bankruptcy, you are capped in your homestead at $125,000 [indexed].  But there's an important exception for in-state movers: someone who's simply moving within state and hence not exemption shopping is exempted from this rule under 522(p)(2)(B).  This left a loophole: what if you were not exemption surfing across state lines and in fact never even bought new property, but simply hadn't filed a homestead declaration on your long-owned Blackacre?  Would that run afoul the text or the spirit of 522(p) and require the punitive cap?  We said no and no respectively; the Ninth Circuit said guarded no and no, so we'll take that as the right outcome.  (It also followed the Fifth Circuit in result; someone can post the link if inclined).

Now we just wait for another circuit to go crazy so it can go up to the Supremes...

Full post as published by Credit Slips on October 03, 2009 (boomark / email).