Fifth Circuit Adopts Literal Reading of Exemption Statute

Fifth Circuit Adopts Literal Reading of Exemption Statute

One of the reforms adopted by BAPCPA was to increase the amount of time a person had to spend in a state before he could take advantage of that state's exemptions. Under 11 U.S.C. Sec. 522(b)(3)(A), a person must live in a state for 730 days to claim that state's exemptions. If the debtor does not satisfy the 730 day requirement, the law of the state where the debtor lived for the greater portion of the 180 days prior to the 730 days applies. This provision was meant to make it harder for a debtor to enhance his exemptions by moving to a new state prior to bankruptcy. However, a new opinion from the Fifth Circuit shows that the statute can have some unintended consequences. Ingalls v. Camp, No. 09-50852 (5th Cir. 1/21/11). You can find the opinion here.

The debtor moved from Florida to Texas during the 730 days before bankruptcy. As a result, he was required to use exemptions available under Florida law. The debtor claimed federal exemptions. However, Florida law prohibits "residents" from using federal exemptions. The trustee objected, contending that the court should apply Florida law as if the debtor were still a resident of Florida. The Bankruptcy Court agreed and sustained the objection. In re Camp, 396 B.R. 194 (Bankr. W.D. Tex. 2008).

The District Court reversed and was affirmed by the Fifth Circuit. The basis for its reasoning was straightforward. "Residents" of Florida could not use federal exemptions. Camp was not a "resident" of Florida. Therefore, he could select federal exemptions even though his exemptions were determined under Florida law.

Read the entire article at A Texas Bankruptcy Lawyer's Blog