*

 The Honorable Harry S. Mattice, Jr., United States District Judge for the Eastern District of

Tennessee, sitting by designation.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 12a0274p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

IN RE: STEVEN M. SCHAFER,

Debtor.

_____________________________________

THOMAS C. RICHARDSON,

Trustee-Appellee,

v.

STEVEN M. SCHAFER,

Debtor-Appellant (11-1340 & 11-1387),

STATE OF MICHIGAN,

Intervenor-Appellant (11-1340).

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Nos. 11-1340/1387

Appeal from the Bankruptcy Appellate Panel

of the United States Court of Appeals for the Sixth Circuit.

Nos. 09-03268; 09-09415—Scott W. Dales, Bankruptcy Judge.

Argued: June 1, 2012

Decided and Filed: August 20, 2012 

Before: COLE and CLAY, Circuit Judges; MATTICE, District Judge.*

_________________

COUNSEL

ARGUED: Daniel E. Sonneveldt, OFFICE OF THE MICHIGAN ATTORNEY

GENERAL, Lansing, Michigan, Scott P. Zochowski, Troy, Michigan for Appellants.

Nicholas J. Daly, LEWIS, REED & ALLEN P.C., Kalamazoo, Michigan, for Appellee.

ON BRIEF: Heather M.S. Durian, OFFICE OF THE MICHIGAN ATTORNEY

GENERAL, Lansing, Michigan, Scott P. Zochowski, Troy, Michigan for Appellants.

Nicholas J. Daly, LEWIS, REED & ALLEN P.C., Kalamazoo, Michigan, for Appellee.

Tara Twomey, NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY

ATTORNEYS, San Jose, California, for Amici Curiae.

1
Nos. 11-1340/1387 In re Schafer Page 2

_________________

OPINION

_________________

COLE, Circuit Judge. The Constitution’s Bankruptcy Clause grants Congress

the power to establish “uniform Laws on the subject of Bankruptcies throughout the

United States[,]” U.S. Const. art. I, § 8, cl. 4, and its Supremacy Clause makes the laws

that Congress passes pursuant to that power the “supreme Law of the Land[,]” U.S.

Const. art. VI, cl. 2. The question before this Court is whether, in light of those

provisions, a state may enact an exemption scheme that applies only to debtors in

bankruptcy. The bankruptcy trustee argues that a state may not, that such a law would

violate both the Bankruptcy Clause and the Supremacy Clause. The debtor and the State

of Michigan disagree. They argue that the interpretation given to the phrase “uniform

Laws” by both the Supreme Court and this Court permits states to act in the arena of

bankruptcy exemptions even if they do so by making certain exemptions available only

to debtors in bankruptcy, and that such exemptions schemes are not invalidated by the

Supremacy Clause. We agree, and thus AFFIRM the judgment of the bankruptcy court

and hold that Michigan’s bankruptcy-specific exemption statute, Mich. Comp. Laws

§ 600.5451, is constitutionally sound.

I. BACKGROUND

None of the underlying facts are in dispute. In March 2009, Steven Schafer, the

debtor-appellant, filed a voluntary petition under Chapter 7 of the Bankruptcy Code.

Richardson v. Schafer (In re Schafer), 455 B.R. 590, 592 (B.A.P. 6th Cir. 2011).

Michigan law permits debtors in bankruptcy to choose their exemptions from those set

forth in 11 U.S.C. § 522(d), from a set of general exemptions available to all Michigan

residents irrespective of their bankruptcy status, Mich. Comp. Laws § 600.6023, or from

a list of exemptions available solely to debtors in bankruptcy, Mich. Comp.

Laws § 600.5451.
Nos. 11-1340/1387 In re Schafer Page 3

1

Originally, two bankruptcy court judgments were appealed to the bankruptcy appellate

panel—Schafer’s and Dorothy Ann Jones’s. This Court granted a stipulated motion to dismiss Jones as

a party to the appeal.

Schafer elected to claim a homestead exemption under the last of these, which

permits bankruptcy debtors—and only bankruptcy debtors—to exempt up to $30,000 of

the value of the home, or up to $45,000 if the debtor is over the age of 65 or disabled.

Mich. Comp. Laws § 600.5451(1)(n). These figures are adjusted for inflation triennially,

such that Schafer, who is disabled, claimed a total exemption of $44,695 in the value of

his home. Schafer, 455 B.R. at 592; see also Mich. Dep’t of Treasury, Property Debtor

in Bankruptcy May Exempt from Levy or Sale Inflation Adjusted

Amounts, 3961 Rev. 01-11 (Apr. 15, 2011), available at

http://www.michigan.gov/documents/BankruptcyExemptions2005_141050_7.pdf.

The homestead exemption contained in § 600.5451 is substantially more generous than

either its federal counterpart ($21,625), 11 U.S.C. § 522(d)(1), or the Michigan general

homestead exemption ($3,500), Mich. Comp. Laws § 600.6023(1)(h).

Thomas Richardson, the trustee-appellee (“Trustee”), subsequently filed an

objection to Schafer’s use of § 600.5451’s exemption scheme.1 Schafer, 455 B.R. at

592. The Trustee argued that the bankruptcy-specific exemption statute violates the

Bankruptcy Clause, as well as the Supremacy Clause.

 The Bankruptcy Court for the Western District of Michigan held the bankruptcyspecific exemption scheme constitutional. In re Jones, 428 B.R. 720, 721 (Bankr. W.D.

Mich. 2010). In so doing, the bankruptcy court relied on Supreme Court and Sixth

Circuit precedent, including our decision in Rhodes v. Stewart, 705 F.2d 159 (6th Cir.

1983), for the proposition that states have concurrent authority to promulgate laws

governing exemptions applicable in bankruptcy cases. Jones, at 428 B.R. The

bankruptcy court suggested that Rhodes was at odds with another of our decisions, Hood

v. Tennessee Student Assistance Corp., 319 F.3d 755 (6th Cir. 2003), aff’d on other

grounds, 541 U.S. 440 (2004), over whether Congress retained exclusive authority to

implement bankruptcy laws. Jones, 428 B.R. at 727. After conducting a lengthy inquiry

into the history of the “uniform Laws” language of the Constitution’s Bankruptcy
Nos. 11-1340/1387 In re Schafer Page 4

2

In June 2011, a number of consumer advocacy groups, including the National Association of

Consumer Bankruptcy Attorneys, the National Consumer Law Center, the Legal Services Association of

Michigan, the Michigan Poverty Law Program, and the Council of the Consumer Law Section of the State

Bar of Michigan, moved to file an amicus brief advocating for reversal of the BAP’s judgment. This Court

granted that motion.

Clause, and taking into account the binding effect of Rhodes on our later decision in

Hood, the bankruptcy court adopted the reasoning set forth in Rhodes to hold that

Michigan’s concurrent authority appropriately permitted § 600.5451’s enactment. Id.

The bankruptcy court also concluded that the law at issue here, § 600.5451(1)(n), was

not in actual conflict with the system provided for by the Bankruptcy Code. Id. The

bankruptcy court’s decision, however, conflicted with other decisions from that district

that had invalidated § 600.5451. See In re Pontius, 421 B.R. 814 (Bankr. W.D. Mich.

2009); In re Wallace, 347 B.R. 626 (Bankr. W.D. Mich. 2006).

The Trustee appealed to the United States Bankruptcy Appellate Panel of the

Sixth Circuit (“BAP”), at which point the State of Michigan moved to intervene in

support of Schafer’s position. The BAP granted the motion, but nonetheless reversed

the bankruptcy court and found the bankruptcy-specific exemption statute

unconstitutional, Schafer, 455 B.R. at 591.

The BAP relied in part on our decision in Hood to hold that, in general, Congress

has exclusive authority to promulgate bankruptcy laws. Rhodes, the BAP held, stood for

the proposition that states have concurrent jurisdiction in the area of bankruptcy

exemptions, but only because Congress affirmatively delegated that power; the power

to create a bankruptcy-specific exemption statute was, according to the BAP, outside the

scope of that delegation. Id. at 603. The BAP further held that even if such a power

were within the scope of the delegation, the Constitution’s Bankruptcy Clause requires

“geographic uniformity” between the exemptions available to a debtor in bankruptcy and

a debtor outside of bankruptcy. Id. at 606. Finding that § 600.5451 precluded such

geographic uniformity, and was thus unconstitutional, the BAP declined to consider the

bankruptcy court’s Supremacy Clause analysis. Id. The State of Michigan timely

appealed the BAP’s judgment to this Court.2
Nos. 11-1340/1387 In re Schafer Page 5

3

It bears noting that the Trustee’s argument here differs from his other uniformity argument,

discussed below; here, the Trustee argues that the “uniform Laws” language serves as a procedural restraint

that restricts states from acting at all, whereas below he argues that the language acts as a substantive

standard against which to judge a bankruptcy law.

II. ANALYSIS

In reviewing cases appealed from the BAP, we focus our review on the

bankruptcy court’s decision. Nardei v. Maughan (In re Maughan), 340 F.3d 337, 341

(6th Cir. 2003). In doing so, findings of facts are reviewed for clear error, whereas

conclusions of law are reviewed de novo. Nicholson v. Isaacman (In re Isaacman),

26 F.3d 629, 631 (6th Cir. 1994). Where, as here, a statute is challenged as

unconstitutional, we construe the statute to avoid constitutional infirmity when “fairly

possible.” Eubanks v. Wilkinson, 937 F.2d 1118, 1122 (6th Cir. 1991) (quoting Crowell

v. Benson, 285 U.S. 22, 62 (1932)).

A. The Power to Pass Bankruptcy Legislation

As an initial matter, the parties disagree on which entities are vested with the

power to pass laws directly affecting the bankruptcy process. The Trustee argues that

by virtue of its application solely to debtors in bankruptcy, Michigan’s bankruptcyspecific exemption statute is a “bankruptcy law.” A general exemption statute, on the

other hand, is a “non-bankruptcy law” because all debtors, regardless of bankruptcy

status, may take advantage of it to shield assets from creditors. The “uniform Laws”

language of the Bankruptcy Clause, the Trustee contends, endows Congress with the

exclusive authority to pass bankruptcy laws, and Michigan overstepped its bounds when

it passed § 600.5451.3

In support of his exclusivity argument, the Trustee directs our attention to

language in Hood describing the original understanding of the Bankruptcy Clause: “As

it was initially understood, the Bankruptcy Clause represented the states’ total grant of

their power to legislate on bankruptcy. . . . The authority was understood to be exclusive

because any lesser grant would have defeated the grant’s original purpose.” Hood,

319 F.3d at 764. Such a system would permit the bankruptcy process to rise “above
Nos. 11-1340/1387 In re Schafer Page 6

4

Rhodes referred to § 522(b)(1), though the relevant language is now contained in § 522(b)(2).

See Pub. L. 109-8, 119 Stat. 55.

individual states’ interests.” Id. The Trustee, as became clear during oral argument,

believes that any statutory developments since the Constitution’s passage may only

abrogate such exclusivity if the legislative intent to do so is manifest. What the Trustee

does not do, however, is provide us with a full picture of the Hood Court’s analysis of

such exclusive power. In the very next paragraph, we explained that “this understanding

that the federal power was exclusive eventually gave way to an acceptance that states

could, in the absence of federal legislation, pass laws on bankruptcy . . . .” Id. at 765.

Hood, which resolved whether Congress could properly abrogate a state’s sovereign

immunity pursuant to § 106 of the Bankruptcy Code, does not stand as an unyielding

barrier to state action in the bankruptcy field.

The bankruptcy court, as well as the debtor in this case, calls our attention to our

earlier pronouncements in Rhodes, in which we stated that “[i]t is fundamental that the

state and federal legislatures share concurrent authority to promulgate bankruptcy

laws . . . .” Rhodes, 705 F.2d at 163. Unlike the bankruptcy court, we do not read

Rhodes to conflict with Hood, which had nothing to do with the issue of exemptions and,

therefore, did not discuss Rhodes. Under those precedents, the states retain the power

to act where the federal government has declined to do so (Hood) or where, as in the area

of exemptions, it has decided to permit the states to act (Rhodes). And perhaps

presciently, for our purposes anyway, the Rhodes Court noted that “the Supremacy

Clause and the doctrine of preemption will serve to invalidate state promulgations to the

extent that they are inconsistent with or contrary to federal laws.” Id.

Rhodes emphasizes the importance of 11 U.S.C. § 522(b)(2), the “opt-out”

provision, which permits a state to preclude its citizens from utilizing the federal

exemption scheme outlined in § 522(d). The decision explained that “Congress did not

intend to preempt bankruptcy exemptions through promulgation of 11 U.S.C. § 522(d)

since it vested in the states the ultimate authority to determine their own bankruptcy

exemptions [via § 522(b)(2)].”4

 Id. Rhodes, in turn, was cited approvingly in Storer v.
Nos. 11-1340/1387 In re Schafer Page 7

French (In re Storer), wherein we noted that “the states are empowered to create

whatever exemptions they elect . . . .” 58 F.3d 1125, 1128 (6th Cir. 1995) (quoting

Rhodes, 705 F.2d at 163).

The Trustee’s arguments would be better received had Congress decided to

require all bankruptcy debtors to use the federal exemptions, but such a scheme was

specifically considered and rejected with the enactment of the Bankruptcy Code.

Sensing a need for reform of the exemption scheme in place under the Bankruptcy Act,

Congress tasked a legislative commission with modernizing bankruptcy laws to address

a “[l]ack of uniformity in the treatment of debtors.” See Eric A. Posner, The Political

Economy of the Bankruptcy Reform Act of 1978, 96 Mich. L. Rev. 47, 68 (1997) (citing

Report of the Comm’n on the Bankr. Laws of the United States, H.R. Doc. No. 93-137,

at 4 (1973)). That commission recommended adopting a set of uniform federal

exemptions, but a “last minute compromise thwarted this attempt at uniformity.” Marla

D. Wells, Note, Federal Bankruptcy Exemptions: How Far Out Is Opting Out?,

37 Baylor L. Rev. 811, 814 (1985). Unfortunately, there is “scant available legislative

history” that could provide an insight into what the drafters intended the scope of the

opt-out provision to be. James B. Haines, Jr., Section 522’s Opt-Out Clause:

Debtors’ Bankruptcy Exemptions in a Sorry State, 1983 Ariz. St. L.J. 1, 8 (1983).

Some have divined from such legislative tea leaves—or more accurately, from

the lack of any such tea leaves—a congressional intent to prohibit states from enacting

bankruptcy-specific exemption statutes. For example, in a decision relied on by the

Trustee, one bankruptcy court held that “in adopting 11 U.S.C. § 522(b)(3), Congress

did not intend to allow a bankruptcy debtor to claim exemptions under a state

bankruptcy-specific exemption law.” In re Reinhart, 460 B.R. 466, 467 (Bankr. E.D.

Mich. 2011). In so holding, the Reinhart court relied in part on Hanover Nat’l Bank v.

Moyses, 186 U.S. 181, 187 (1902). Based on Moyses, the bankruptcy court found that

“it is clear that in adopting the 1898 Bankruptcy Act, Congress intended only that a

state’s exemptions from execution on a judgment would be applicable in bankruptcy,

because such a constraint is necessary to meet the constitutional uniformity
Nos. 11-1340/1387 In re Schafer Page 8

requirement.” Reinhart, 460 B.R. at 468. That court also noted that the absence of any

legislative history of the Bankruptcy Code discussing a change in the law of exemptions

to permit states to enact bankruptcy-specific exemptions schemes provided support for

its view that Congress did not intend such a change; if Congress had so intended,

§ 522(b)(3) would have been unconstitutional under the interpretation of the Bankruptcy

Clause set forth in Moyses. Id. at 469.

The argument regarding congressional intent is not well taken. “In such a

substantial overhaul of the system [as that made by the Bankruptcy Code], it is not

appropriate or realistic to expect Congress to have explained with particularity each step

it took.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240 (1989). “Rather, as

long as the statutory scheme is coherent and consistent, there generally is no need for a

court to inquire beyond the plain language of the statute.” Id. at 240–41. The plain

language of § 522(b) demonstrates unambiguously that “Congress has not seen fit to

restrict the authority delegated to the states by requiring that state exemptions apply

equally to bankruptcy and non-bankruptcy cases,” such that “we are without authority

to impose such a requirement.” Sheehan v. Peveich, 574 F.3d 248, 252 (4th Cir. 2009).

Statutes ought to be construed as constitutional when fairly possible, Eubanks, 937 F.2d

at 1122, and, for the reasons explained below, an interpretation of § 522 that permits

states to enact bankruptcy-specific exemptions schemes does not run afoul of either the

Bankruptcy or Supremacy Clauses of the Constitution.

The BAP contended that reliance on Rhodes and Storer is not enough to

legitimate § 600.5451, given that those cases do “not lead to the conclusion that states

are allowed to take the affirmative step of enacting legislation that applies only to state

residents who file for bankruptcy.” Schafer, 455 B.R. at 604. Thus, the BAP asserts, the

power to forbid is not the same as the power to create, id. at 604, and a bankruptcyspecific statute like § 600.5451 is outside the scope of Congress’s limited delegation of

power. But this interpretation misunderstands the concept of concurrent jurisdiction in

the area of bankruptcy exemptions, and imputes, without a basis to do so, a limit onto

a state’s power to act. As the Rhodes Court explained, states are permitted to act in this
Nos. 11-1340/1387 In re Schafer Page 9

arena, with the proviso that the Supremacy Clause and the doctrine of preemption will

invalidate such laws if necessary. 705 F.2d at 163.

In reaching its conclusion, the BAP analyzed a number of arguments set forth by

other courts that had concluded that because § 522(b)(3)(A) allowed debtors to exempt

property under “[s]tate or local law that is applicable,” Congress authorized states to pass

statutes like § 600.5451. Schafer, 455 B.R. at 603. The BAP disagreed, finding that

such arguments “conflate[] two different rights: that is, the debtor’s right to exempt

property under applicable state law, with the states’ right to enact legislation which must

satisfy Constitutional requirements.” Id. at 604. Put simply, the BAP contends that

Congress’s enactment of § 522(b) was a grant of power to debtors, and not a general

grant of power to states. Therefore, “[t]he states’ ‘concurrent jurisdiction’ is limited to

‘opting-out’ or passing laws which apply to all state residents.” Id.

That § 522(b)’s ambit is so cabined finds no basis in our precedent. To the

contrary, Rhodes speaks to a state’s power to enact particular legislation. Rhodes,

705 F.2d at 163 (“Congress . . . vested in the states the ultimate authority to determine

their own bankruptcy exemptions [and § 522(b)(2)] encompasses no facial restrictions

upon the states’ authority to opt-out.”). Other courts have found that such a construction

of § 522(b)(2) is improper, given that other parts of the Bankruptcy Code refer to state

or local law, yet it is without dispute that in those sections it would be improper for

states to legislate:

Throughout the Bankruptcy Code, Congress has referred to “state or

local law” without the phrase “non-bankruptcy” and, by doing so, has not

implicitly “permitted states to pass their own bankruptcy laws on the

subject.” See, e.g., 11 U.S.C. § 346(b) which requires a trustee to

withhold amounts from the payment of wage claims “under applicable

state or local tax law.” Does this mean that a state or locality could

promulgate a tax law applicable only to trustees in bankruptcy imposing

a higher withholding level for bankruptcy claimants or more onerous

withholding duties on trustees? Also, consider 11 U.S.C. § 506(b) which

allows a secured creditor to collect “fees, costs, or charges provided for

under . . . State statute.” Does this authorize a state to grant or deny to

a secured creditor the right to collect such fees only in federal bankruptcy

cases?
Nos. 11-1340/1387 In re Schafer Page 10

In re Pontius, 421 B.R. at 818 n.9. The distinction between the statutes discussed in

Pontius and § 522(b) is that § 522(b) implicitly authorizes states to preempt federal law

on the subject of exemptions, Rhodes, 705 F.2d at 163, and to create their own

exemption schemes. These other statutes, such as §§ 346(b) and 506(b), permit no

similar act.

Our understanding of Rhodes, § 522(b), and the “uniform Laws” language of the

Bankruptcy Clause supports our view that Michigan retains the power to pass a law like

§ 600.5451. States are afforded a wide berth in the exemptions arena. “The Bankruptcy

Code allows the States to define what property a debtor may exempt from the

bankruptcy estate that will be distributed among his creditors[,]” and “[n]othing in

[§ 522(b)] limits a State’s power to restrict the scope of its exemptions . . . .” Owen v.

Owen, 500 U.S. 305, 306, 308 (1991). That Michigan has the power to pass such a law

does not end the inquiry; that law must also be compliant with the substantive limitations

of the Bankruptcy and Supremacy Clauses.

B. The Requirement of Uniformity

The Bankruptcy Clause of the Constitution grants Congress the authority to

establish “uniform Laws on the subject of Bankruptcies throughout the United States[.]”

U.S. Const. art. I, § 8, cl. 4. The “uniform Laws” language serves as a substantive limit

on statutory acts, but is not meant to act as a “straightjacket that forbids” distinguishing

among different classes of debtors. Ry. Labor Execs. Ass’n v. Gibbons, 455 U.S. 457,

469 (1982). We have previously rejected formalistic approaches to uniformity in

bankruptcy, because doing so “overlooks the flexibility inherent in the constitutional

provision . . . .” Schultz v. United States, 529 F.3d 343, 354 (6th Cir. 2008) (quoting

Blanchette v. Conn. Gen. Ins. Corps., 419 U.S. 102, 158 (1974)).

The only decision by a federal court of appeals that has addressed the uniformity

requirement of the Bankruptcy Clause in the context of a state’s bankruptcy-specific

exemption statute concluded that the statute did not violate the uniformity requirement.

See Kulp v. Zeman (In re Kulp), 949 F.2d 1106, 1109 n.3 (10th Cir. 1991) (“Defendants

. . . argue in the alternative that Colo. Rev. Stat. § 13-54-104 violates the constitution’s
Nos. 11-1340/1387 In re Schafer Page 11

uniformity requirement for bankruptcy laws because it creates a bankruptcy exemption

which is not available to other Colorado debtors. This argument is meritless. [It]

confuse[s] the geographical uniformity doctrine with the well-established principle that

states may pass laws which do not conflict with the federal scheme. . . . In this case, we

have no conflict because 11 U.S.C. § 522 expressly delegates to states the power to

create bankruptcy exemptions.”) (internal citations omitted). For the reasons stated

below, we reach the same conclusion.

The bankruptcy court determined that the uniformity requirement applied only

to federal enactments, and was thus not relevant to the instant inquiry. Jones, 428 B.R.

at 729 n.9. The BAP disagreed, holding that “[a] state law which applies only to debtors

in bankruptcy must be analyzed under the uniformity requirement of the Bankruptcy

Clause.” Schafer, 455 B.R. at 601. Implicit in this argument is the notion that

§ 600.5451 was passed pursuant to a delegation of Congress’s Bankruptcy Clause power,

so any resultant laws must be bound in the same way as if passed by the federal

legislature. But any such delegation would have been pursuant to 11 U.S.C. § 522(b)(2),

and we have previously, and repeatedly, held that § 522(b)(2) “is not an unconstitutional

delegation of congressional legislative power but rather is merely a recognition of the

concurrent legislative power of the state legislatures to enact laws governing bankruptcy

exemptions.” Storer, 58 F.3d at 1129 (quoting Rhodes, 705 F.2d at 164). Regardless,

we need not decide whether the Bankruptcy Clause’s introductory phrase applies to state

enactments, because even if it does, § 600.5451 meets the requirements of the

Bankruptcy Clause.

1. Development of uniformity jurisprudence

Prior to Congress’s decision to adopt a uniform national framework for

bankruptcy, states were understood to have power to pass insolvency legislation. “So

long as there is no national bankrupt act, each state has full authority to pass insolvent

laws binding persons and property within its jurisdiction . . . .” Brown v. Smart,

145 U.S. 454, 457 (1892). Upon national action, however, states lost such power.

Moyses, 186 U.S. at 187. Moyses, which upheld the 1898 Bankruptcy Act, answered
Nos. 11-1340/1387 In re Schafer Page 12

whether the adoption of state exemption schemes made the Bankruptcy Act invalid for

want of uniformity. The Moyses Court ultimately held that a bankruptcy exemption

system “is, in the constitutional sense, uniform throughout the United States, when the

trustee takes in each state whatever would have been available to the creditor if the

bankrupt[cy] law had not been passed.” Moyses, 186 U.S. at 190. The Trustee argues,

and the BAP held, that this language establishes § 600.5451’s infirmity. According to

the Trustee, “[t]he bankruptcy-specific exemption statute fails the ‘geographic’

uniformity test by not affording a trustee in bankruptcy the same opportunities as a

creditor or receiver outside of bankruptcy.” Schafer, 455 B.R. at 606. This argument

fails on multiple levels.

First, the portion of Moyses that the BAP and the Trustee latch onto focuses on

whether federal bankruptcy law may recognize exemptions permitted by the various

states even though the states’ exemptions schemes are not uniform with one another.

Two sentences prior to the passage on which the Trustee relies, the Supreme Court stated

that “[i]t is quite proper . . . to confine [federal bankruptcy law’s] operation to such

property as other legal process could reach.” Moyses, 186 U.S. at 190. The Moyses

Court was not addressing whether bankruptcy and non-bankruptcy debtors must be

treated alike, but rather whether a scheme whereby bankruptcy debtors in different states

enjoy different exemptions is ultimately proper.

Second, in Moyses the Supreme Court did not hold that a bankruptcy exemption

scheme is uniform in the constitutional sense only if the trustee takes in each state

whatever would have been available if the bankruptcy law had not been passed. Rather,

the Supreme Court held that “[t]he laws passed on the subject [of bankruptcy] must . . .

be uniform throughout the United States, but that uniformity is geographical, and not

personal,” and further stated that “we do not think that the provision of the [Bankruptcy

Act] as to exemptions is incompatible with the rule.” Id. at 188. In other words, the

general rule of law laid down by the Supreme Court in Moyses was that the uniformity

requirement is geographical and that variations resulting from differences in state law

are not unconstitutional. See Schultz, 529 F.3d at 353. Indeed, this Court has previously
Nos. 11-1340/1387 In re Schafer Page 13

recognized that Moyses’s interpretation of the uniformity requirement mandates

geographical, as opposed to personal, uniformity, Schultz, 529 F.3d at 350–51, and that

“[o]ver the last century, the Supreme Court has wrestled with the notion of geographic

uniformity, ultimately concluding that it allows different effects in various states due to

dissimilarities in state law, so long as the federal law applies uniformly among classes

of debtors.” Id. at 351. As explained below, taken together, § 522 and § 600.5451 apply

no less uniformly among classes of debtors than did the exemption scheme that the

Supreme Court found to be constitutional in Moyses.

Third, as the amici point out, full adherence to the language in Moyses on which

the Trustee relies would call into doubt the constitutionality of the federal exemptions

set forth in § 522(d)— the amount of which exceed the exemptions available in certain

states under their general exemption statutes. For example, the federal homestead

exemption of $21,625 far exceeds Michigan’s general homestead exemption of $3,500.

If Michigan had not passed a bankruptcy-specific exemption statute, a debtor in

Michigan (because Michigan has not opted out of the federal exemptions) could have

elected to use either the general homestead exemption of $3,500 or the federal

homestead exemption of $21,625. If the debtor were to elect the federal homestead

exemption, the trustee would not take “whatever would have been available . . . if the

bankrupt[cy] law had not been passed.” Moyses, 186 U.S. at 190. And yet no one

suggests that this would be impermissible, demonstrating the flaw in literal adherence

to the language in Moyses on which the Trustee grounds his argument. See Sticka v.

Applebaum (In re Applebaum), 422 B.R. 684, 693 (B.A.P. 9th Cir. 2009) (“The Trustee

argues that under California’s bankruptcy-only exemption scheme, creditors might not

receive the same assets that otherwise might be available to them under California’s

generally applicable exemption statute. . . . However, that is exactly the result in a

non-opt-out state when a debtor chooses the federal exemption scheme. In such

instances, it may be that the bankruptcy trustee will not recover the same assets of a

debtor for distribution that he or she would under state law.”).
Nos. 11-1340/1387 In re Schafer Page 14

As one court recently noted in its discussion of Moyses, states and the federal

government “have concurrent jurisdiction in bankruptcy, although only Congress has the

power to establish a uniform system of bankruptcy. And once Congress passes one

uniform act, if that system has differing effects on citizens of different states based on

a particular state’s laws, that result is acceptable.” In re Westby, No. 11-40986, 2012

WL 1144412, at *5 (Bankr. D. Kan. Apr. 4, 2012).

2. Section 522 and Section 600.5451 Operate Uniformly

This Court has previously held that the Bankruptcy Clause shall act as “no

limitation upon congress as to the classification of persons who are to be affected by

such laws, provided only the laws shall have uniform operation throughout the United

States.” Leidigh Carriage Co. v. Stengel, 95 F. 637, 646 (6th Cir. 1899) (Taft, J.). And

indeed, the uniformity provision has served as the basis for statutory invalidation by the

Supreme Court only once—in upholding a challenge to a federal statute that, by its

terms, applied to only one entity. See Gibbons, 455 U.S. at 472–73.

Our recent decision in Schultz provides additional insight into the contours of our

uniformity jurisprudence. Schultz, which upheld the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005 (BAPCPA) against a uniformity clause challenge,

reiterated that a federal bankruptcy statute’s incorporation of state laws may, without

presenting any constitutional issue, “lead to different results in different states.”

529 F.3d at 351 (quoting Stellwagen v. Clum, 245 U.S. 605, 613 (1918)), a view that is

consistent with the interpretation of Moyses provided above. See Schultz, 529 F.3d at

353 (“Moyses, Stellwagen, and Blanchette cannot be read as standing for anything more

than their precise holding: that Congress does not exceed its constitutional powers in

enacting a bankruptcy law that permits variations based on state law or to solve

geographically isolated problems.”). Schultz clarified that it is not the outcome that

determines the uniformity, but the uniform process by which creditors and debtors in a

certain place are treated. “Congress may enact non-uniform laws to deal with

geographically isolated problems as long as the law operates uniformly upon a given
Nos. 11-1340/1387 In re Schafer Page 15

5

Section 600.5451 applies differently if the debtor is elderly or disabled, and allows for a higher

homestead exemption for those persons. That distinction is not being challenged.

class of creditors and debtors.” Id.; see also Gibbons, 455 U.S. at 473 (“[A] law must

at least apply uniformly to a defined class of debtors.”).

In Schultz, the debtors contended that the BAPCPA’s means test—which applies

only if a debtor’s annualized current monthly income is above the median for the

applicable state—violated the uniformity requirement because (1) the relief available to

debtors under the Bankruptcy Code depends in part on the results of the means test and

(2) the calculations required under the means test are based in part on the state and

county in which the debtor resides. 529 F.3d at 353. We disagreed with the debtors’

position, finding that the law applied uniformly to those debtors who were part of a

“defined class” (i.e., those whose annualized current monthly income is above the family

median income for the applicable state”). Id. at 352. “Congress is allowed to distinguish

among classes of debtors, and to treat categories of debtors differently . . . .” Id. Such

distinctions need not be subject to “heightened scrutiny,” id. at 356, and it is not this

Court’s place “to pass judgment on the wisdom of congressional legislation,” id. at 353.

For our purposes, it is worth noting that, with limited exceptions, all bankruptcy debtors

under § 600.5451 are treated the same, or uniformly, in contrast to those debtors

discussed in Schultz.

5

Quite simply, the Bankruptcy Clause does not require geographic uniformity

between the exemptions available to debtors in bankruptcy and debtors outside of

bankruptcy. Moreover, Michigan’s decision to distinguish between debtors in

bankruptcy and those outside of bankruptcy makes sense. As the amici point out,

debtors in bankruptcy are often in more dire straits than those whose property is subject

to levy by a specific creditor. And, as the State of Michigan points out, § 600.5451 more

easily allows for bankrupt debtors to stay in their homes, updates the Michigan

exemptions (at least for bankruptcy debtors) for inflation, and encourages debtors to take

advantage of the bankruptcy process so as to allow for the orderly disposition of assets.

The Trustee does not dispute these concerns.
Nos. 11-1340/1387 In re Schafer Page 16

6

Relying on Rhodes, the Fourth Circuit held that “[t]here can be no preemption . . . where

Congress expressly and concurrently authorizes state legislation on the subject.” Sheehan, 574 F.3d at 252

(internal quotation marks omitted). “[Section 522(b)(a)] is an express delegation to the states of the power

to create state exemptions in lieu of the federal bankruptcy exemption scheme.” Id. “Congress has not

seen fit to restrict the authority delegated to the states by requiring that state exemptions apply equally to

bankruptcy and non-bankruptcy cases, and we are without authority to impose such a requirement.” Id.;

see also Kulp, 949 F.2d at 1109 n.3 (recognizing “the well-established principle that states may pass laws

which do not conflict with the federal scheme” and stating that “we have no conflict [between the

Bankruptcy Code and a state law providing for an exemption available only to debtors in bankruptcy]

because 11 U.S.C. § 522 expressly delegates to states the power to create bankruptcy exemptions”). In

a federal appellate decision relied on by the Trustee, Kanter v. Moneymaker (In re Kanter), 505 F.2d 228

(9th Cir. 1974), the issue was whether the bankruptcy estate had an interest in the debtor’s prepetition

personal injury lawsuit. There was no question that the estate had such an interest under the provisions

of the Bankruptcy Act, while the interest would not be part of the estate pursuant to a California statute

prohibiting “an assignee by operation of law of a party to a personal injury action [from] acquir[ing] any

interest in or lien rights upon moneys recovered by such party for general damages.” Id. at 230 n.1. The

Ninth Circuit accepted the district court’s construction of the state statute as applicable to bankruptcy

trustees and then, affirming the district court, held that the statute was in conflict with the Bankruptcy Act,

rendering it unconstitutional under the Supremacy Clause. See id. at 231. As explained below, there is

no conflict between the Bankruptcy Code and § 600.5451.

Ultimately, the Trustee’s arguments rely on a strained reading of the “uniform

Laws” language of the Bankruptcy Clause—one that neither the Supreme Court, nor this

Court, has adopted. It would be anomalous for us to hold that a federal statute under

which the relief available to debtors depends in part on their state’s median income is

more compliant with the “uniform Laws” language than a federal statute and a state

statute that, working together, treat all debtors in bankruptcy the same way. Given that

the Bankruptcy Clause’s “uniformity requirement was drafted in order to prohibit

Congress from enacting private bankruptcy laws,” Schultz, 529 F.3d at 352 (quoting

Gibbons, 455 U.S. at 472), adoption of the Trustee’s arguments would read into the

Constitution’s text requirements that simply have no basis in the precedent of the

Supreme Court, our precedent, or the common law.

C. Section 600.5451 and the Supremacy Clause

 The BAP declined to reach the issue of whether the bankruptcy court erred in

holding that § 600.5451 does not violate the Supremacy Clause. See Schafer, 455 B.R.

at 606. In the only decision by a federal court of appeals that has addressed whether a

state’s bankruptcy-specific exemption statute violated the Supremacy Clause, the United

States Court of Appeals for the Fourth Circuit concluded that it did not, see Sheehan,

574 F.3d at 252,6

 as did the United States Bankruptcy Appellate Panel of the Ninth

Circuit, the only bankruptcy appellate panel that has yet addressed the issue. See
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Applebaum, 422 B.R. at 689. For the reasons explained below, we agree with those

courts as well as the bankruptcy court below and thus reject the Trustee’s challenge to

§ 600.5451 based on the Supremacy Clause.

“Deciding whether a state statute is in conflict with a federal statute and hence

invalid under the Supremacy Clause is essentially a two-step process of first ascertaining

the construction of the two statutes and then determining the constitutional question

whether they are in conflict.” Perez v. Campbell, 402 U.S. 637, 644 (1971). As all

parties recognize, the purpose of § 600.5451 is to provide bankrupt debtors with the right

to retain certain essential property and thereby emerge from bankruptcy with a fresh

start. Similarly, “one of the primary purposes of [federal bankruptcy law] is to give

debtors a new opportunity in life and a clear field for future effort, unhampered by the

pressure and discouragement of pre-existing debt.” Id. at 648 (internal quotation marks

and alterations omitted); see also In re Guikema, 329 B.R. 607, 613 (Bankr. S.D. Ohio

2005) (“Exemptions give the debtors a so-called ‘grubstake’ to begin their fresh start and

act as a safety net, so that the debtor and his family are not completely impoverished due

to creditor collection action or bankruptcy such that they become wards of the state.”)

(internal quotation marks and alterations omitted). Seemingly, then, the statutes have

similar objectives.

A state statute may conflict with federal law in one of three ways. Under

“express preemption,” the intent of Congress to preempt state law is explicit. R.R.

Ventures, Inc. v. Surface Transp. Bd., 299 F.3d 523, 561 (2002). Under “field

preemption,” Congress’s regulation in a field “is so pervasive or the federal interest is

so dominant that an intent can be inferred for federal law to occupy the field

exclusively.” Id. And, under “conflict preemption,” the laws in question conflict such

that it is impossible for a party to comply with both laws simultaneously, or where the

enforcement of the state law would hinder or frustrate the full purposes and objectives

of the federal law. Id. Although there is an assumption that the federal law is not

preemptive, such an assumption is not triggered “when the [s]tate regulates in an area

where there has been a history of significant federal presence.” United States v. Locke,
Nos. 11-1340/1387 In re Schafer Page 18

529 U.S. 89, 108 (2000). The parties agree that explicit preemption is not applicable in

the instant inquiry.

This Court has previously held that Congress’s regulation in the bankruptcy field

is “pervasive,” but did not indicate which type of preemption applied in that case.

Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 425 (6th Cir. 2000); see also MSR

Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 913 (9th Cir. 1996) (“[T]he lengthy

Bankruptcy Code, 11 U.S.C. §§ 101 et seq., demonstrates Congress’s intent to create a

whole system under federal control . . . .”). What is more, our disposition in Pertuso

primarily rested upon a conflict, and not field, preemption analysis. Pertuso, 233 F.3d

at 426 (“Permitting assertion of a host of state law causes of action to redress wrongs

under the Bankruptcy Code would undermine the uniformity the Code endeavors to

preserve and would stand as an obstacle to the accomplishment and execution of the full

purposes of Congress.”) (emphasis added) (quotation marks and alterations omitted).

In light of the Supreme Court’s statement that “state laws are thus suspended only

to the extent of actual conflict with the system provided by the Bankruptcy Act of

Congress,” Stellwagen, 245 U.S. at 613 (emphasis added), and our explanation in Rhodes

that “Congress expressly authorize[d] the states to ‘preempt’ the federal legislation,”

705 F.2d at 163, we question whether field preemption is applicable. See also In re

Sullivan, 680 F.2d 1131, 1137 (7th Cir. 1982) (criticizing the use of preemption analysis

when assessing state bankruptcy exemption law); Applebaum, 422 B.R. at 689

(“[F]ederal bankruptcy law is not so pervasive, nor is the federal interest so dominant,

as to wholly preclude state legislation in the area.”). And, given that bankruptcy

exemptions were a creature of state law prior to the Bankruptcy Code’s enactment in

1978, the case for field preemption is even more tenuous. See Wyeth v. Levine, 555 U.S.

555, 575 (2009) (“The case for federal pre-emption is particularly weak where Congress

has indicated its awareness of the operation of state law in a field of federal interest, and

has nonetheless decided to stand by both concepts and to tolerate whatever tension there

is between them.”) (alterations omitted) (quoting Bonito Boats, Inc. v. Thunder Craft

Boats, Inc., 489 U.S. 141, 166–67 (1989)). Regardless, we need not answer whether
Nos. 11-1340/1387 In re Schafer Page 19

Congress has occupied the field of bankruptcy law as a whole, because, given our

reasoning in Rhodes, field preemption is inapplicable in the area of bankruptcy

exemptions. As such, § 600.5451 need only be considered under a conflict-preemption

framework.

The Trustee contends that in enacting § 522(b)(2) Congress sought to strike a

proper balance between the competing interests of creditors and debtors. That may be

true, but the Trustee’s suggestion that a state’s enactment of a bankruptcy-specific

exemption statute would undermine such a balance goes too far. For this argument, the

Trustee relies in part on In re Cross, 255 B.R. 25, 34 (Bankr. N.D. Ind. 2000). Cross

invalidated Indiana’s bankruptcy-specific exemption statute because it frustrated the full

effectiveness of national bankruptcy laws. Yet none of the arguments put forth by the

Cross court are specific to bankruptcy-specific exemption statutes; they can just as easily

be made against general state exemption statutes. The Cross court tried to distinguish

these two scenarios when it wrote:

Recognizing otherwise applicable state exemptions in bankruptcy

proceedings is not the same as allowing states to create exemptions just

for those proceedings. The first situation simply recognizes

non-bankruptcy entitlements. It allows debtors to protect the same

property in bankruptcy that they could keep from creditors outside of

bankruptcy. The second directly controls the distribution of assets

between debtors and creditors and, thus, how the consequences of

bankruptcy are allocated between them.

Cross, 255 B.R. at 34. While this is an arguably valid distinction, it is immaterial for

purposes of determining whether § 600.5451 frustrates national bankruptcy policy.

Assume that a state permits non-bankrupt debtors to exempt $10,000 of the value of their

home from creditors, but allows bankruptcy debtors a homestead exemption in excess

of the federal exemption—for example, $50,000. Also assume that another state permits

all debtors, those in bankruptcy and those that are not, a $50,000 homestead exemption.

It is unclear to us why whatever frustrations to national bankruptcy policy that exist
Nos. 11-1340/1387 In re Schafer Page 20

7

“A few states—notably Texas and Florida—permit debtors to claim homestead exemptions in

unlimited amounts, although both have acreage limitations.” 3 William L. Norton, Jr., Norton Bankruptcy

Law & Practice 3d § 56:10 n.10 (3d ed. 2011). Under 11 U.S.C. § 522(p) and (q), which were added in

2005 with the enactment of the BAPCPA, the amount of homestead exemptions available under state law

is limited in certain instances to $146,450.

under the first scenario do not also exist in the second; the Trustee does not dispute,

however, that the second scenario is wholly appropriate under existing law.7

Were we to invalidate § 600.5451 on this basis, such frustration would still exist.

And we are reticent to find unsurmountable obstacles that may result from § 600.5451’s

function when Congress, via § 522(b), expressly permitted variations in how states treat

bankruptcy exemptions. Even if there were some conflict between § 600.5451 and the

exemption policy purportedly reflected by the federal exemption amounts established

in § 522, the Trustee does not make clear why this rises to the level of conflict necessary

to trigger preemption. See Storer, 58 F.3d at 1128–29 (“[S]tates may enact different

exemptions which would possibly conflict with Congress’ own exemption policy as it

was reflected in § 522(d).”) (internal quotation marks omitted). “Simply because the

exemptions differ from the federal exemptions (or from its non-bankruptcy counterpart),

does not mean that such differences create a conflict that impedes the accomplishment

and execution of the Bankruptcy Code.” Applebaum, 422 B.R. at 691.

Perceiving a conflict between § 303 (providing for the commencement of

involuntary bankruptcies) and bankruptcy-specific exemption statutes that allow

exemptions higher than the general exemption laws, the Trustee argues that such an

exemption scheme might provide a disincentive for creditors to file involuntary

bankruptcy cases. As explained above, however, § 522 imposes no restrictions on the

concurrent authority of the states to enact bankruptcy-specific exemption statutes. We

will not read any such restrictions into another section of the Bankruptcy Code, such as

§303, that has nothing to do with exemptions.

Indeed, on an as-applied basis, the Michigan statute actually furthers, rather than

frustrates, national bankruptcy policy. As the Supreme Court has repeatedly noted, the

goal of the Bankruptcy Code is to provide debtors in bankruptcy with a fresh start.
Nos. 11-1340/1387 In re Schafer Page 21

Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007) (“The principal purpose

of the Bankruptcy Code is to grant a fresh start to the honest but unfortunate debtor.”)

(internal quotation marks omitted). By permitting debtors in bankruptcy a higher

homestead exemption than either the general state exemption statute or the federal

exemption statute allow, bankruptcy debtors in Michigan are better able to achieve a

fresh start and to obtain “a new opportunity in life with a clear field for future effort,

unhampered by the pressure and discouragement of preexisting debt.” Grogan v.

Garner, 498 U.S. 279, 286 (1991) (quotation marks omitted). Accordingly, Michigan’s

bankruptcy-specific exemption statute frustrates the full effectiveness of national

bankruptcy policy no more than other statutory frameworks that have survived our

scrutiny. See Storer, 58 F.3d at 1125; Rhodes, 705 F.2d at 159.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the bankruptcy court and

conclude that Michigan’s bankruptcy-specific exemption statute, Mich. Comp. Laws

§ 600.5451, is constitutional.