Title: Nationsbank v. Stine

State: maryland

Issuer: Maryland Supreme Court

Document:

Bank of America f/k/a NationsBank v. Stine
Misc. No. 3, September Term, 2001
HEADNOTES: 
BANKRUPTCY, 
GARNISHMENT, 
WAGES, 
PREFERENTIAL
TRANSFER 
A debtor in bankruptcy may claim as exempt from the bankruptcy estate, pursuant to
Maryland Code Annotated, (1998) § 11-504 of the Courts and Judicial Proceedings Article,
wages previously garnished by a judgment creditor pursuant to Maryland Code Annotated,
§§ 15-601-607 (2000) of the Commercial Law Article, when the garnishment is avoided as
a preferential transfer.
United States Court of Appeals for the Fourth Circuit
Case No.: 00-2352
IN THE COURT OF APPEALS OF
MARYLAND
Misc. No.  3
   
September Term, 2001
                                                                            
BANK OF AMERICA
f/k/a/NATIONSBANK
                                            
v.
KENNETH W. STINE
                                      
                                                                            
Bell, C.J.
Eldridge*
Raker
Wilner
Cathell
Harrell
Battaglia,
               JJ.
                                                                            
Opinion by Bell, C.J.
                                                                            
Filed:    December 30, 2003
*Eldridge, J., now retired, participated in the
hearing and conference of this case while an
active member of this Court; after being recalled
pursuant to the Constitution, Article IV, Section
3A, he also participated in the decision and
adoption of this opinion.
1Maryland Code (1975, 2000 Replacement Volume) § 15-601.1, provides:
“(a)  Disposable wages.- In this section "disposable wages" means the part of
wages that remain after deduction of any amount required to be withheld by
law.  
“(b)  Amounts of wages exempt; medical insurance payment.- The following
are exempt from attachment:  
“(1) Except as provided in item (2) of this subsection, the
greater of:  
“(i) The product of $145 multiplied by the number
of weeks in which the wages due were earned; or
“(ii) 75 percent of the disposable wages due;  
“(2) In Caroline, Kent, Queen Anne's, and Worcester counties,
I.
          The limited issue that has been certified to this court by the United States Circuit Court
of Appeals for the Fourth Circuit, and which we must answer, is whether, when a
garnishment is avoided as a preferential transfer, a debtor in bankruptcy, pursuant to
Maryland Code (1973, 1998 Replacement Volume), '11-504 of the Courts and Judicial
Proceedings Article (“Courts”), may claim as exempt from the bankruptcy estate, wages
previously garnished by a judgment creditor, pursuant to Maryland Code (1975, 2000
Replacement Volume), '' 15-601-607 of the Commercial Law Article (“CL”). 
II.          The facts are not in dispute.
      In February, 1998, the appellant, NationsBank, obtained a judgment against the appellee,
Kenneth Stine, in the District Court of Maryland. It thereafter filed a Writ of Garnishment
to enforce its judgment and, pursuant that writ,  attached 25% of the appellee=s wages, the
amount allowable by  law.  CL §15-601.1(b)  exempts  from attachment 75% of the debtor’s
disposable wages.1
for each work week, the greater of:  
“(i) 75 percent of the disposable wages due; or  
“(ii) 30 times the federal minimum hourly wages
under the Fair Labor Standards Act in effect at the
time the wages are due; and  
“(3) Any medical insurance payment deducted from an
employee's wages by the employer.  
“(c)  Calculation per pay period.- The amount subject to attachment shall be
calculated per pay period.” 
2
           On December 23, 1998, the appellee filed for relief under Chapter 7 of the United
States Bankruptcy Code.   Pursuant to 11 U.S.C. §522 (h), which empowers a debtor to avoid
a transfer of property when the bankruptcy trustee could have, but chose not to avoid such
a transfer, the appellee sought to recover the $1,064.05 of his wages that the appellant had
garnished within the 90 days preceding the appellee=s bankruptcy filing. The United States
Bankruptcy Court entered judgment in favor of the appellee.
          The appellant noted an appeal to the United States District Court for the District of
Maryland, arguing that the appellee could not recover his wages under 11  U.S.C. § 522 (h)
because, although the trustee could have avoided the transfer, the appellee could not, because
the wages were not exempt under the Maryland exemption scheme.   More particularly, the
appellant argued that the clear and unambiguous language of Maryland’s exemption scheme,
codified at Courts §11-504, expressly prohibits a debtor from claiming an exemption in wage
garnishments.  Further, the appellant argued that the appellee had already availed himself of
the only exemption to which he was entitled, when 75% of his net wages were exempted
pursuant to CL §15-601.1 in connection with the appellant’s garnishment. 
3
           Conceding that, as written, the language of §11-504 (e) disallows the exemption of
wage garnishments, the appellee argued, nevertheless, that the exception did not mean that
wage garnishments could never be exempted.  To the contrary, he submits, relying on the
decision of the District Court in this case, see Bank of Am, N.A., f/k/a/ Nationsbank, N.A.
v. Stine, 252 B. R. 902, 904 (D. Md. 2000), that the language of § 11-504 (e) simply prevents
a judgment creditor from claiming § 11-504 exemptions “at the time of the attachment”. Id.
at 904.   The  appellee also asserted that, once a debtor files for bankruptcy, that subsection
does not protect a creditor’s interest in a preferential transfer, to which the creditor is not
entitled under federal bankruptcy law.   To accept the appellant’s interpretation, argued the
appellee, would mean that the § 11-504 exemption scheme would protect the wage
garnishment as a preferential transfer, “ . . . to the detriment of the bankruptcy estate and the
debtor’s right to emerge from bankruptcy with adequate possessions to begin his fresh start,
as was Congress’ intent.” [the appellee’s brief at 7].  
       The United States District Court agreed with the appellee and  affirmed the Bankruptcy
Court decision. See Stine, supra., 252 B. R. 902.   In so doing, the court explained that § 11-
504 (e) was intended to prevent a non-bankruptcy judgment debtor from claiming exemption
from wage attachment, 75% of his wages as allowed under CL §15-601.1 and then also
claiming an exemption from attachment under §11-504 (e) so as to prevent the creditor from
attaching the 25% of the wages CL § 15-601.1 makes available to a judgment creditor. Id.
at 904.  Further, the court stated that Courts § 11-504 (e) did not prevent a bankruptcy debtor
4
from claiming an exemption in attached wages which, in bankruptcy, amounted to a
preferential transfer.   Id. at 904-05.   The court opined:
“Section 11-504 (e) ... provides a shield for a creditor who has properly
garnished wages under section 15-601.1 against a debtor’s misuse of section
11-504 exemptions.   The shield is a critical part of the statutory scheme and
must be honored.   NationsBank, however, is seeking to use the shield as a
sword to frustrate the policy of federal bankruptcy law of avoiding preferential
transfers. This is not a case in which Stine asserted section 11-504(e)
exemptions to defeat a lawful garnishment at the time his wages were attached.
 Rather, his aim is to undo preferential transfers to which NationsBank is not
entitled under federal law.”
Id., 252 B. R. at 904.   The court further elucidated that “when enacting sections 11-504 and
15-601.1 the Maryland General Assembly did not intend unnecessarily to undermine a
fundamental policy of federal bankruptcy law. Therefore, if section 11-504 can be read in a
manner that reconciles both federal and state interests, it is that reading that must govern.”
Id. 
The appellant timely noted an appeal to the United States Court of Appeals for the
Fourth Circuit.   In turn, pursuant to Maryland Code, (1973, 1998 Replacement Volume)  '
' 12-603, 12-605 and 12-606 of the Courts and Judicial Proceedings Article, that court
certified the following question of law for our determination:
“Whether a debtor in bankruptcy may claim as exempt from the
bankruptcy estate, pursuant to Maryland Code Annotated, Courts and Judicial
Proceedings ' 11-504 (1998) wages previously garnished by a judgment
creditor pursuant to Maryland Code Annotated, Commercial Law II '' 15-
601-607 (2000), when the garnishment is avoided as a preferential transfer.”
We agree with the appellee, the Bankruptcy Court, and the District Court and hold that
211 U. S. C. § 547 (b) provides, in pertinent part: 
“(b) Except as provided in subsection (c) of section, the trustee may avoid any
transfer of an interest of the debtor in property - -
“(1) to or for the benefit of a creditor;
“(2) for or on account of an antecedent debt owed by the debtor before
such transfer was made;
“(3) made while the debtor was insolvent;
“(4) made - -
5
Maryland’s exemption scheme disallows the exemption of wage attachments only to the
extent that it applies to a non-bankruptcy judgment debtor under § 15-601.1, but that when
a debtor files for bankruptcy, any  wage attachment, as a pre-petition judgment, becomes a
preferential transfer in the form of earned wages, which is avoidable by the trustee and
derivatively avoidable by the debtor within the contemplation of the Federal Bankruptcy
Code and thus, is exempt.
II.
The field of bankruptcy is generally governed by Title 11 of the United States Code,
the Federal Bankruptcy Code.   Under that code, when a debtor files for bankruptcy under
Chapter 7, 11 U.S.C. § 701 et seq., all of that debtor’s assets are liquidated and transferred
to the bankruptcy estate.   A trustee is assigned to oversee the administration of the
bankruptcy estate and to ensure that the bankrupt individual’s debts are satisfied to the extent
possible from the assets of the bankruptcy estate.  The trustee is empowered to avoid
preferential transfers that occurred within the 90 days preceding the bankruptcy filing under
11 U.S.C. § 547.2   Further, pursuant to 11 U. S. C. § 522 (h), the  code empowers the
“(A) on or within 90 days before the date of the
filing of the petition ....”
6
bankruptcy debtor to avoid certain preferential transfers when the trustee has chosen not to
do so.  That section provides:
“(h) The debtor may avoid a transfer of property of the debtor or recover a
setoff to the extent that the debtor could have exempted such property under
subsection (g)(1) of this section if the trustee had avoided such transfer, if--
“(1) such transfer is avoidable by the trustee under section 544,
545, 547, 548, 549, or 724(a) of this title or recoverable by the
trustee under section 553 of this title; and
“(2) the trustee does not attempt to avoid such transfer.”
This  case had its genesis when, after he filed for bankruptcy,  the appellee sought to
avoid, under 11 U. S. C. § 522 (h), the amount of his wages the appellant had garnished
within the 90 days prior to his filing bankruptcy.   
To avoid a transfer pursuant to §  522 (h), a bankruptcy debtor must meet five
requirements.  Stine, 252 B. R. at 903, citing Humphrey v. Herridge (In re Humphrey), 165
B.R. 578, 580 (Bankr. D. Md. 1993).   Those requirements are: the debtor must show that
“(1) the debtor could have exempted the property at issue; (2) the transfer would have been
avoidable by the trustee; (3) the trustee has not attempted to avoid the transfer; (4) the
transfer was not voluntary; and (5) the debtor did not conceal the property.”   Both parties
agree that prongs 2 through 5 have been satisfied. The only question that remains, therefore,
and the one that has been certified to this Court for resolution, is whether the appellant could
have exempted the property at issue.
3 11 U.S.C. § 522(b)(1) reads:
“(b) Notwithstanding section 541 of this title, an individual debtor may exempt
from property of the estate either . . .
“(1) property that is specified under subsection (d) of this section unless
the State law that is applicable to the debtor under paragraph (2)(A)
does not so authorize.”
For an exhaustive discussion of the Bankruptcy Reform Act and Congress’s
decision to allow states to opt out of the Federal bankruptcy exemption scheme, see
generally, In re Neiheisel, 32 B R. 146 (Bankr. D. Utah 1983).
4Maryland Code (1973, 2002 Replacement Volume) §11-504(g), Maryland’s
opt out provision, provides: “In any bankruptcy proceeding, a debtor is not entitled to the
federal exemptions provided by § 522 (d) of the Federal Bankruptcy Code.” 
7
The exemptions available to a debtor in bankruptcy under the federal bankruptcy
exemption scheme are enumerated at 11 U. S. C. § 522 (d).  In  the Bankruptcy Reform Act
of 1978, however,  Congress permitted states to “opt out” of the Federal exemption scheme
and enact their own exemption provisions.3  Maryland is one of the states that has chosen to
opt out of the Federal scheme,4  and thus, the exemptions a bankruptcy debtor  may take are
limited to those enumerated in Md. Code (1973, 1998 Repl. Vol.) § 11-504 of the Courts and
Judicial Proceedings Article.   Whether, therefore, the appellee may exempt the appellant’s
wage attachments under the current Maryland scheme will turn on the interpretation given
the Maryland exemption statute, in particular, subsection 11-504 (e) addressing whether a
bankruptcy debtor may exempt  pre-petition transfers in the form of wage garnishments. 
    Determining the meaning of § 11-504 (e) is a matter of  statutory construction, the
primary goal of which is to “ascertain and effectuate the intention of the legislature.” Oaks
v. Connors, 339 Md. 24, 35, 660 A.2d 423, 429 (1995).   In order to discern legislative intent,
8
we first examine the words of the statute and if, giving them their plain and ordinary
meaning,  the statute is clear and unambiguous, we will end our inquiry. Comptroller of the
Treasury v. Kolzig, 375 Md. 562, 567, 826 A.2d 467, 469 (2003).  As we have recognized,
however,  “[a]n ambiguity may ... exist even when the words of the statute are crystal clear.
That occurs when its application in a given situation is not clear.” Blind Indus. & Servs. of
Md. v. Md. Dep’t of Gen. Servs., 371 Md. 221, 231, 808 A.2d 782, 788 (2002).  Therefore,
a statutory provision may be ambiguous: “1) when it is intrinsically unclear; or 2) when its
intrinsic meaning may be fairly clear, but its application to a particular object or circumstance
may be uncertain.” Gardner v. State, 344 Md. 642, 648-49, 689 A.2d 610, 613 (1997).
Further, “when the statute to be interpreted is part of a statutory scheme, . . . [we read it in
context, together with the other statutes] on the same subject, harmonizing them to the extent
possible. . . .” Mid-Atlantic Power Supply Ass’n v. Pub Serv. Comm’n, 361 Md. 196, 204,
760 A.2d 1087, 1091 (2000).   We also “seek to avoid constructions that are unreasonable,
or inconsistent with common sense,” Frost v. State, 336 Md. 125, 137, 647 A.2d 106, 112
(1994), and we will presume that “the Legislature ‘intends its enactments to operate together
as a consistent and harmonious body of law,'" Toler v. Motor Vehicle Admin., 373 Md. 214,
220, 817 A.2d 229, 234 (2003), quoting  State v. Ghajari, 346 Md. 101, 115, 695 A.2d 143,
149 (1997) (quoting State v. Harris, 327 Md. 32, 39, 607 A.2d 552, 555 (1992)), so that “no
part of the statute is rendered meaningless or nugatory.” Id., (citing  Gillespie v. State, 370
Md. 219, 222, 804 A.2d 426, 428 (2002)); see also Montgomery County v. Buckman, 333
9
Md. 516, 523-24, 636 A.2d 448, 452 (1994). In our endeavor to harmonize the provisions of
all of the relevant statutes, this Court will prefer an interpretation that allows us to avoid
reaching a constitutional question. East Prince Frederick Corp. v. County Board of Comm’rs,
320 Md. 178, 182, 577 A.2d 27, 29 (1990). Automobile Trade Ass’n v. Ins. Comm’r, 292
Md. 15, 21, 437 A.2d 199, 202 (1981).
As relevant, CJP §11-504 provides:
“(b) In general – The following items are exempt from execution on a
judgment:
*     *     *     *
“(5) Cash or property of any kind equivalent in value to $3,000
is exempt, if within 30 days from the date of the attachment or
the levy by the sheriff, the debtor elects to exempt cash or
selected items of property in an amount not to exceed a
cumulative value of $3,000.
*     *     *     *
“(e) Wage attachments – The exemptions in this section do not apply to wage
attachments. 
“(f) Interest in real or personal property. – In addition to the exemptions
provided in subsection (b) of this section and in other statutes of this State, in
any proceeding under Title 11 of the United States Code, entitled
“Bankruptcy”, any individual debtor domiciled in this State may exempt the
debtor’s aggregate interest, not to exceed $2,500 in value in real property or
personal property.”
Although both the appellant and the appellee agree that the plain language of the
statute purports to prohibit the exemption of wage attachments, each offers a  different, yet
reasonable, interpretation of how § 11-504 (e) should be applied in light of all of the relevant
5 This court refers to  11-504(b)(5) and 11-504(f) as “cafeteria exemptions” ,
which essentially allow a bankruptcy debtor to exempt any form of cash or
property so long as it falls within the monetary caps enumerated in those
sections. 
10
statutory provisions and circumstances.   Our task is to ascertain the proper application of §
11-504 (e). 
The appellee argues that he may exempt, pursuant to  the so-called “cafeteria”5
exemption provisions enumerated in § 11-504 (b) (5) or § 11-504 (f), the amount of the
wages that the appellant garnished because, as the bankruptcy debtor, he has the derivative
right to avoid the pre-petition preferential payment made to the appellant.  More particularly,
the appellee asserts that the language of § 11-504 (e) purporting to prohibit the exemption
of wage attachments was meant to “provide protection for a creditor who has properly
garnished wages under §15-601 against a debtor’s misuse of CJP §11-504 exemptions.” [the
appellee’s brief at 12].  The provision, argues the appellee, was not meant to apply so as to
prohibit the exemption of property which is avoidable as a pre-petition preferential transfer
under 11 U. S. C. § 522 (h).  
The appellant asserts that, in light of the authority given to the states to enact their
own more or less stringent exemption schemes, we should read § 11-504 (e), the language
of which it characterizes as “plain,” as a comprehensive measure to disallow both bankruptcy
and non-bankruptcy debtors from exempting wage attachments.  In the alternative, the
appellant argues that, although there is little legislative history on the enactment of § 11-504
(e), the Legislature has impliedly indicated that it intended to disallow the exemption of wage
6 Article 1, Section 8 of the United States Constitution provides, in pertinent
part:
“The Congress shall have Power... 
*     *     *
“To establish an uniform Rule of Naturalization, and uniform Laws on the
subject of Bankruptcies throughout the United States.”
11
attachments in bankruptcy situations.   This is so, it contends, because, despite its many
opportunities to do so, the General Assembly has chosen not to amend the language
prohibiting the exemption of wage attachments. 
Our analysis is not limited to the language and intent, of the exemption provisions
enumerated in § 11-504 (e).   The Supremacy Clause of the United  States Constitution,
instructs:
“This Constitution, and the Laws of the United States which shall be made in
Pursuance thereof; and all Treaties made, or which shall be made, under the
Authority of the United States, shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby, any Thing in the Constitution or
Laws of any State to the Contrary notwithstanding.”
U.S. Constitution, Art. VI, Clause 2.   Further, pursuant to Article 1,  Section 8 of the United
States Constitution, Congress has plenary power to enact uniform bankruptcy laws.6  Witbeck
v. Electro Nuclear Systems Corp., 243 Md. 563, 569, 221 A.2d 888, 891 (1966). Therefore,
the states are bound whenever Congress legislates in the area of bankruptcy. Old Town Bank
v. McCormick, 96 Md. 341, 351-52, 53 A. 934, 935-36 (1903). See Perez v. Campbell, 402
U.S. 637, 649, 91 S. Ct. 1704, 1711, 29 L. Ed. 2d 233, 242 (1971).   Consequently, a state
law that is inconsistent with, or contrary to, the express language, or a primary purpose, of
a federal law on the subject is preempted and, thus, deemed invalid. Witbeck, supra, 243 Md.
12
at 569,  221 A.2d at 891  (holding that Maryland insolvency laws are preempted where
Congress has legislated in the field of bankruptcy and thus, the court lacked the jurisdiction
to provide a remedy under the Maryland insolvency laws).  Conoway v. Social Services
Administration, 298 Md. 639, 649-50, 471 A.2d 1058, 1063-64 (1984) (holding that a state
regulation “which allow[ed] the State to use conserved federal benefits for reimbursement
of past foster care costs, [was] preempted by [Federal statutes] which prohibit the State from
seizing such benefits for reimbursements”, and thus violated the Supremacy Clause of the
United States Constitution).   See  Old Town Bank, supra, 96 Md. at 351-52, 53 A. at 935-36.
In Perez, judgment was entered against  Perez in an action resulting from an
automobile accident with the appellee, Campbell.   Thereafter, Perez filed for bankruptcy and
the amount of the Campbell judgment,  along with his other debts, were discharged. Despite
the discharge of the judgment, however, the state of Arizona suspended Perez’s license
pursuant to the Arizona bankruptcy statute, which provided that a discharge in bankruptcy
did not prevent an individual’s driver’s license from being suspended if that individual failed
to satisfy a judgment entered against him as a result of a motor vehicle accident.   The issue
for the court was whether that Arizona state bankruptcy law was invalid under the Supremacy
Clause.  The argument proceeded on the premise that such law conflicted with the Federal
Bankruptcy Code.   The Supreme Court held that the state law was unconstitutional because
it conflicted with a primary purpose of the Federal Bankruptcy Code, to “give debtors a new
13
opportunity in life and a clear field for future effort unhampered by the pressure and
discouragement of pre-existing debt,” id. at 648, 91 S. Ct. at 1710-11, 29 L. Ed. 2d at 241-42,
quoting Local Board v. Hunt, 292 U.S. 234, 244, 54 S. Ct. 695, 699, 78 L. Ed. 1230, 1235
(1934), the Court explained.   It further held that Congress “intended this new opportunity
to include freedom from most kinds of preexisting tort judgments.” Id.
To arrive at its conclusion, the Supreme Court relied upon the sage advice of Justice
Black, speaking for the Court in Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404,
85 L. Ed. 581, 587  (1941):
“while ‘[t]his Court, in considering the validity of state laws in the light of
treaties or federal laws touching the same subject, ha[d] made use of the
following expressions: conflicting; contrary to; occupying the field;
repugnance; difference; irreconcilability; inconsistency; violation; curtailment;
and inference, . . . in the final analysis’, our function is to determine whether
a challenged state statute ‘stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress.’”
Id. at 649, 91 S. Ct. at 1711, 29 L. Ed. at 242.   The Court added that, when the effect of the
state law was to contravene the “full effectiveness of the federal law,” id. at 652, 91 S. Ct.
at 1712, 29 L. Ed. at 244, in violation of the Supremacy Clause, the fact that the state law
was not enacted for the purpose of frustrating federal bankruptcy law did not matter. 
Our cases and Perez are instructive on the proper interpretation of § 11-504 (e).   They
teach  that state laws that prevent the full effectiveness of the federal bankruptcy law are
invalid under the Supremacy Clause.   If, therefore, there is an interpretation of a state
bankruptcy law that both satisfies a state interest and exists harmoniously with the federal
14
bankruptcy legislation or policy, that interpretation is most desirable. That preference also
comports with the rules of statutory construction that seek to avoid constitutional questions
and to avoid a statutory interpretation that renders another, or any, statutory provision
nugatory.
It is clear that one of the primary tenets of the federal bankruptcy scheme is that no
general creditor should have greater right or access to repayment of debt than any other. In
re Barefoot, 952 F.2d 795, 797-98 (4th Cir. 1991).  To that end, Congress has  enunciated, 
and emphasized, a fundamental distaste for preferential transfers and has specifically granted
bankruptcy trustees the power to avoid such preferential transfers for the benefit of the debtor
estate. See 11 U.S.C. § 547 (b). The policy underlying allowing bankruptcy trustees to
recover preferential transfers from transferees when the transfer has been made within 90
days of the bankruptcy filing was stated in H.R. Rep. No. 95-595 at 175-76 (1977) reprinted
in  1978 U.S.C.C.A.N. at 6138.  
“ First, by permitting the trustee to avoid pre-bankruptcy transfers that occur
within a short period before bankruptcy, [thus discouraging creditors] from
racing to the courthouse to dismember the debtor during his slide into
bankruptcy. The protection thus afforded the debtor often enables him to work
his way out of a difficult financial situation through cooperation with all of his
debtors. Second, and more important, the preference provisions facilitate the
prime bankruptcy policy of equality of distribution among creditors of the
debtor.  Any creditor that received a greater payment than others of his class
is required to disgorge so that all may share equally.  The operation of the
preference section to deter ‘the race of diligence’ of creditors to dismember the
debtor before bankruptcy furthers the second goal of the preference section --
that of equality of distribution.” 
15
Id. (emphasis added). See also, Beiger v. IRS, 496 U.S. 53, 58, 110 S. Ct. 2258, 2262, 110
L.Ed. 2d 46, 56 (1990) (holding that “[e]quality of distribution among creditors is a central
policy of the Bankruptcy Code,” and that “[s]ection 547(b) furthers this policy by permitting
a trustee in bankruptcy to avoid certain preferential payments made before the debtor files
for bankruptcy”).
 
Under Perez, if this Court were to accept the appellant’s interpretation of § 11-504 (e)
and hold, pursuant to the express language of the provision,  that a debtor may never exempt
wage attachments that are garnished within 90 days of the bankruptcy filing, a “loophole”
effectively would be created, through which judgment creditors could hold onto pre-petition
transfers in frustration of  the clear policy against preferential transfers and creditor
favoritism.   That  interpretation would also render the statute in violation of the Supremacy
Clause and unconstitutional. 
While we acknowledge  Perez’s instruction, this Court also recognizes that it is
equally true that, where Congress has expressly authorized states to enact bankruptcy
legislation concurrently, that legislation is not rendered unconstitutional merely because it
differs from the federal law or the statutory scheme covering the area of concurrent coverage.
Old Town Bank of Baltimore v. McCormick, 96 Md. at 351-52, 53 A. 935-36.  Thus, in light
of the ability of the states to “opt out” of the federal bankruptcy exemption scheme, a number
of state courts have upheld state bankruptcy exemption statutes that differ greatly from the
federal exemption scheme. These states interpret the “opt out” authority as recognizing that
16
states may enact exemption schemes that are more, or less, inclusive than the federal. In re
Butcher, 189 B. R. 357, 370-71 (Bankr. D. Md.1995), affd. 125 F.3d 238 (4th Cir. 1997). See
also. McManus v. Avco Financial Svcs., 681 F.2d 353, 355-47 (5th Cir. 1982) (Since
Louisiana ‘opted out’ of the federal exemptions contained in the Bankruptcy Code and by
statute mandated that household goods subject to chattel mortgage were not exempt, chattel
mortgages on debtor’s household goods and furnishings did not impair exemption to which
debtors would have been entitled under Bankruptcy Code.); Rhodes v. Stewart, 705 F.2d 159,
163-64 (6th Cir. 1983) cert. denied, 464 U.S. 983, 104 S. Ct. 427, 78 L. Ed. 2d 361(1983).
(holding that, because Congress allowed states to “opt out” of the federal bankruptcy
exemption scheme, the amount a bankruptcy debtor could claim as a homestead exemption
under the Tennessee exemption scheme was valid even though the allowable exemption
amount was significantly less than that allowed for homestead exemptions under the federal
exemption scheme). 
In Butcher, supra, the issue relevant to this case was whether the Maryland exemption
under § 11-504 (b), which purported to exempt “money payable in the event of sickness,
accident, injury or death of any person, including compensation for loss of future earnings,”
violated the Supremacy Clause because the Maryland exemption scheme allowed for
substantially more generous exemptions than was permitted under 11 U.S.C. § 522 (d).  
The court  held that it did not. Id.,189 B. R. at 370-72.   It explained that, because
Congress had expressly authorized states to legislate the amount of the exemptions debtors
17
may claim in bankruptcy, the fact that the Maryland exemption was more generous than the
federal exemption did not create a conflict between the Federal Bankruptcy Code and the
Maryland exemption scheme. Id.
Unlike in Butcher, Rhodes and McManus, in this case, it is not asserted that a conflict
exists between a  Maryland exemption and the federal exemption scheme.    Rather,  at issue
is whether the interpretation of § 11-504 (e) that  the appellant offers, that that section
prescribes an absolute prohibition to the exemption of wage attachments in bankruptcy,
reflects the General Assembly’s intention or conflicts with the right of the bankruptcy trustee,
and the  derivative right of the  debtor, to avoid pre-petition preferential transfers prohibited
by 11 U. S. C. § 522 (h).
Bankruptcy courts in the Fourth Circuit have consistently held that the correct
interpretation of §11-504 (e) is that a debtor may not exempt wage attachments in frustration
of a creditor’s judgment under § 15-601.1, and that the language of  § 11-504 (e) may not be
interpreted to exempt wage attachments that amount to a pre-petition preferential transfer.
See In re Norcia, 255 B.R. 394, 397 (4th Cir. 2000) (relying on the reasoning in Stine, 252 B.
R. at 904 to hold  that “...to protect the interests of both the federal and state law, §11-504(e)
should be read to preclude a debtor from asserting an exemption of wages garnished at the
time of attachment but should not be read so that a debtor in bankruptcy may never be able
to exempt garnished wages as cash or personal property”).    See also, In re Smoot, 237 B.
R. 875, 877  (4 th Cir. 1999). 
18
In Smoot, a case almost factually identical to the instant case,  the appellee, a
bankruptcy debtor, as part of his Chapter 13 bankruptcy proceedings and pursuant to 11
U.S.C. § 522 (h), initiated an adversary proceeding to avoid the wages garnished by his
creditor within 90 days of the bankruptcy filing.  The creditor argued that the appellee could
not avoid the property transfer because Maryland’s exemption provisions expressly
prohibited a bankrupt debtor from exempting wage attachments. The court held that the
appellant was entitled to avoid the property, reasoning that, “[w]hile Maryland law
specifically excludes wage attachments from the general exemptions, debtor’s standing under
§ 522 (h) to avoid wage attachments as preferential transfers is derivative from the trustee’s
power to avoid and recover transfers.  What is exempt is not the preferential payment per se
but the funds recoverable by the trustee.” Id. at 881.
The appellee construes § 11-504 (e) to prohibit non-bankruptcy debtors from stacking
exemptions under § 11-504's  “cafeteria exemptions” when that debtor has already claimed,
pursuant to CL § 15-601.1, an exemption from wage attachment of 25% of his wages.   We
agree that the appellee’s interpretation is more palatable, but also that it is the correct
interpretation.   First, it  serves a convincingly plausible purpose under Maryland law.  The
exemption scheme set out in §11-504 is a comprehensive one.  The exemption provisions in
that section do not apply only to bankruptcy debtors; rather, they apply to all judgment
debtors. The General Assembly, however, laid out a specific exemption for wage attachments
under CL § 15-601.1.   That exemption precluded a judgment creditor from attaching any
19
more than 25% of a judgment debtor’s wages.  In light of the greater exemptions available
to a judgment debtor under § 11-504, it is highly conceivable that, absent the prohibition of
§ 11-504 (e), which expressly states that the exemptions listed in that section do not apply
to wage attachments, a judgment debtor could claim an exemption in the 25% of his wages
available to the judgment creditor pursuant to CL § 15-601.1, and, thus, be enabled  to avoid
satisfying any part of the judgment against him and frustrating the creditor’s claim.
Second, in light of the trustee’s authority, to which the debtor is derivatively entitled,
to avoid pre-petition preferential transfers under the Federal Bankruptcy Code, the appellee’s
interpretation of §11-504 (e) as applying only in the non-bankruptcy setting harmonizes with
the federal policy against preferential transfers and creditor favoritism.   This interpretation
of the statute is bolstered by 11 U. S. C. §§ 522 (g) and (h) of the Federal Bankruptcy Code.
 They provide, as follows:
“(g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt
under subsection (b) of this section property that the trustee recovers under
section 510(c)(2), 542, 543, 550, 551 or 553 of this title, to the extent that the
debtor could have exempted such property under subsection (b) of this section
if such property had not been transferred.
*   *   *   *
“(h) The debtor may avoid a transfer of property of the debtor of recover a
setoff to the extent that the debtor could have exempted such property under
subsection (g) (1) of this section if the trustee had avoided such transfer, if - -
“(1) such transfer is avoidable by the trustee under section 544, 544,
547, 548, 549, or 724(a) of this title or recoverable by the trustee under section
553 of this title; and
“(2) the trustee does not attempt to avoid such transfer.”
7There is no dispute in the case sub judice that the trustee could have avoided
the transfer of the property in this case. 
20
 (Emphasis added).   Subsections (g) and (h)  enumerate the derivative powers a debtor has
to avoid certain pre-petition transfers of property.   Subsection (g) allows the debtor to
exempt transfers of property that the trustee recovers under the relevant federal bankruptcy
title provisions as long as the debtor could exempt the property under the federal exemption
scheme.     It dictates, however,  that, before determining whether the preferential transfer
could have been exempted under the federal exemption scheme, the property transfer sought
to be exempted takes on whatever form it would have had, “if such property had not been
transferred.”   Essentially, subsection (g) creates a legal fiction pursuant to which  the nature
of the transferred property is restored to whatever form it took prior to the transfer.   In turn,
subsection (h)  allows a debtor to avoid from his bankruptcy estate, transferred property to
the extent that “the debtor could have exempted such property under subsection (g)(1) of this
section....” 
 Of course, by their express terms, subsections (g) and ( h) contemplate exemptions
that are allowable under the federal exemption scheme.  As we stated before, however,
Maryland has opted out of the federal exemption scheme.  Therefore, the subsections must
be restructured  to reflect the exemptions available to a Maryland debtor.   So viewed,
subsection (g) would read: “The debtor may exempt [under the Maryland exemption
scheme], property that the trustee recovers ... 7  to the extent that the debtor could have
exempted such property [under the Maryland exemption scheme] if such property had not
21
been transferred.”  Similarly, taking into account the Maryland exemption scheme,
subsection (h) would read: “The debtor may avoid a transfer of property of the debtor or
recover a setoff to the extent that the debtor could have exempted such property [under the
Maryland exemption scheme if such property had not been transferred] if the trustee had
avoided such transfer....” 
It is clear that Congress contemplated that a bankruptcy debtor would enjoy the ability
to avoid preferential transfers as a derivative of the trustee’s ability to avoid such transfers.
This is in keeping with the Congressional intent that the debtor emerge from bankruptcy with
adequate resources to have a “fresh start.”   The appellant urges this Court to interpret § 11-
504 (e) as prohibiting the exemption of wage attachments by the appellee.  Pursuant to 11
U.S.C. § 522 (h), however, viewing the transferred property in its form had the appellee’s
wages not been transferred to NationsBank, they would simply constitute earned wages.
Essentially, the federal scheme views any transfer of property within the 90 days prior to an
individual’s bankruptcy filing to be a preferential transfer of “earned wages,” rather than as
attached wages.  Because the Maryland exemption scheme does not contain a provision
prohibiting the exemption of preferential transfers of earned wages (nor could it contain such
a provision and avoid constitutional invalidation under the Supremacy Clause), it is clear to
this Court that such property, because it would constitute an avoidable preferential transfer
under the Federal Bankruptcy Code, even when, prior to bankruptcy, the property was
classified as wage attachments,  may be claimed by a bankruptcy debtor as an  exemption.
22
Of course, a bankrupt debtor may only claim an exemption of the property at issue to
the extent allowable under the Maryland exemption scheme.   See 11 U.S.C. § §522 (b) (1)
& 522 (h). See also, In re Taylor, 312 Md. 58, 63, 537 A.2d 1179, 1181-82 (1988); In re
Humphrey, 165 B. R. at 580.   That fully comports with the General Assembly’s intent to
limit the amount of the  exemptions bankruptcy debtors may claim.  Further, this
interpretation harmonizes the dual purposes of allowing judgment debtors to emerge from
bankruptcy with enough resources to make a “fresh start” and of placing creditors on the
same level plane as it pertains to access to the debtor’s  estate. 
Therefore, we answer the question, “[w]hether a debtor in bankruptcy may claim as
exempt from the bankruptcy estate, pursuant to Maryland Code, Annotated, Courts and
Judicial Proceedings §11-504 (1998) wages previously garnished by a judgment creditor
pursuant to Maryland Code Annotated, Commercial Law II §§15-601-607 (2000), when the
garnishment is avoided as a preferential transfer,” in the affirmative. 
CERTIFIED QUESTION ANSWERED AS
HEREIN SET FORTH. COSTS IN THIS
COURT TO BE EVENLY DIVIDED.