Opinion ID: 198278
Heading Depth: 2
Heading Rank: 2

Heading: Preemption of the Prior Contracted Debt Exception

Text: 22 We now turn to the question of whether the Bankruptcy Code preempts the Massachusetts prior contracted debt exception, Mass. Gen. Laws ch. 188, § 1(2). Unless this exception is also preempted, Weinstein could not claim the homestead exemption since he contracted for the underlying debt before he acquired the homestead estate. 23 We begin by comparing § 522(c) with Mass. Gen. Laws ch. 188, § 1(2), to determine if there is a conflict. Section 522(c) provides that during or after bankruptcy, exempt property is not liable for any prepetition debts except those debts specified in subparagraphs (1)-(3). See 11 U.S.C. § 522(c)(1)-(3). This list includes: (1) debts for certain taxes and customs duties; (2) debts for alimony, maintenance, or support; (3) liens that cannot be avoided; (4) liens that are not void; (5) tax liens; and (6) certain nondischargeable debts owed to federal depository institutions. See id. The exceptions in the Massachusetts homestead statute serve a similar function by withholding homestead protection under state law from certain types of debt. Section 1 provides in relevant part: 24 Said estate shall be exempt from the laws of conveyance, descent, devise, attachment, levy on execution and sale for payment of debts or legacies except in the following cases: 25 (1) sale for taxes; 26 (2) for a debt contracted prior to the acquisition of said estate of homestead; 27 (3) for a debt contracted for the purchase of said home; 28 (4) upon an execution issued from the probate court to enforce its judgment that a spouse pay a certain amount weekly or otherwise for the support of a spouse or minor children; 29 (5) where buildings on land not owned by the owner of a homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand; 30 (6) upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity. 31 Mass. Gen. Laws ch. 188, § 1(1)-(6). The heart of Patriot's argument is that there is no conflict between section 522(c) and the Massachusetts homestead statute. 4 Patriot asserts that the property exempted for purposes of section 522(c) must be defined by Massachusetts law, including all of its built-in limitations. Under this view, the exceptions to the homestead statute operate to define the value of the estate, which is the property exempted, and therefore there is no conflict between § 522(c) and section 1(2). Weinstein, on the other hand, urges us to adopt the view espoused by the First Circuit Bankruptcy Appellate Panel and a majority of the Massachusetts bankruptcy judges--that § 522(c) conflicts with and preempts the prior contracted debt exception. See In re Fracasso, 222 B.R. 400 (1st Cir.BAP 1998); In re Leicht, 222 B.R. 670 (1st Cir.BAP 1998); In re Mills, 211 B.R. 1 (Bankr.D.Mass.1997) (Kenner, J.); In re Whalen-Griffin, 206 B.R. 277 (Bankr.D.Mass.1997) (Feeney, J.); In re Boucher, 203 B.R. 10 (Bankr.D.Mass.1996) (Queenan, Jr., J.). According to this view, exempt property in a bankruptcy case remains liable only for the specific types of debt listed in § 522(c)(1)-(3). Because the Massachusetts prior contracted debt exception is not one of the types of debt specified in § 522(c), it is invalid in bankruptcy. We are persuaded by Weinstein's argument. 32 Congress has plenary power to enact uniform federal bankruptcy laws. See U.S. Const. art. 1, § 8, cl. 4; International Shoe Co. v. Pinkus, 278 U.S. 261, 265, 49 S.Ct. 108, 110, 73 L.Ed. 318 (1929). Consequently, [s]tates may not pass or enforce laws to interfere with or complement the Bankruptcy Act or to provide additional or auxiliary regulations. International Shoe Co., 278 U.S. at 265, 49 S.Ct. at 110 (noting that the intent of Congress in establishing uniform bankruptcy laws necessarily excludes inconsistent state regulation). We recognize that Congress afforded significant deference to state law by allowing bankruptcy debtors to choose state exemptions and by further allowing states to opt out of the federal exemption scheme entirely. See In re Boucher, 203 B.R. at 12 (citing 11 U.S.C. § 522(b)). Yet, such deference does not warrant the conclusion that the property exempted in section 522(c) must be defined by first applying all the built-in exceptions to the state exemption statute. As the Supreme Court recognized in discussing the interplay between § 522(f) and state exemption exceptions in Owen, the state's ability to define its exemptions is not absolute and must yield to conflicting policies in the Bankruptcy Code. See Owen, 500 U.S. at 313, 111 S.Ct. at 1838. Although Massachusetts has not opted out of the federal exemption scheme, as was the case in Owen, the analysis applies equally where the debtor chooses the state exemption scheme. 33 Like the bankruptcy court and the district court below, we are persuaded by Judge Feeney's analysis of the conflict in In re Whalen-Griffin. As Judge Feeney recognized, the Massachusetts exceptions overlap and conflict with § 522(c). See 206 B.R. at 290. While both statutes limit the debts for which exempt property remains liable, the Massachusetts exceptions protect debts left unprotected by § 522(c). We agree with Judge Feeney's conclusion that: 34 Because the exceptions to the Massachusetts homestead have the same effect on the homestead as the exceptions set forth in § 522(c), ... the Massachusetts homestead statute is preempted to the extent that it permits exempt property to be liable for debts other than those expressly enumerated in § 522(c)(1)-(3), particularly because the language employed by Congress in § 522(c) is devoid of ambiguity. 35 206 B.R. at 291-92. On this basis, we conclude that section 1(2) of the homestead statute is preempted by § 522(c) of the Code. See Rini v. United Van Lines, Inc., 104 F.3d 502, 504 (1st Cir.1997) ([A] state statute is void to the extent it is in conflict with a federal statute. (citing Maryland v. Louisiana, 451 U.S. 725, 747, 101 S.Ct. 2114, 2129, 68 L.Ed.2d 576 (1981))), cert. denied, --- U.S. ----, 118 S.Ct. 51, 139 L.Ed.2d 16 (1997). Our conclusion is consistent with numerous decisions in other jurisdictions holding that a state's exceptions to its homestead exemption are preempted by the Bankruptcy Code. See, e.g., In re Maddox, 15 F.3d 1347, 1351 (5th Cir.1994) (holding that lien avoidance under § 522(f) is not limited by state exceptions); In re Opperman, 943 F.2d 441, 443 (4th Cir.1991) (holding that limitation in North Carolina homestead statute was invalid to the extent it conflicted with operation of § 522(f)); In re Scott, 199 B.R. 586, 591-93 (Bankr.E.D.Va.1996) (holding that intentional tort exclusion in Virginia exemption statute conflicts with and is preempted by § 522(c)); In re Conyers, 129 B.R. 470, 472 (Bankr.E.D.Ky.1991) (concluding that the determination of the types of debts that remain collectible after bankruptcy from exempt property is controlled by federal rather than state law). 36 In so holding, we again reject Patriot's insistence that the courts below and the cited Massachusetts bankruptcy courts have all misconstrued the unique character of the Massachusetts homestead exemption. We do not view the Massachusetts statute's creation of an estate of homestead to be so markedly different from the homestead exemptions available under federal or other state's laws that it need not yield to the overriding policies of § 522(c). See In re Leicht, 222 B.R. at 680 ([W]e decline [the creditor's] invitation to recognize the Massachusetts homestead as so different in character from other exemptions that § 522(c)'s fresh start mechanism cannot operate to enlarge its protections.).