Michigan Bankruptcy Blog

The Sixth Circuit Court of Appeals recently held that Michigan's bankruptcy-specific exemption statute is constitutional under the Bankruptcy Clause and Supremacy Clause of the United States Constitution.

Historically, Michigan has allowed bankruptcy debtors to use the federal exemptions under 11 U.S.C. § 522(d), the general state exemptions under M.C.L. § 600.6023, or the state exemptions pursuant to M.C.L. § 600.5451 that are specific to debtors in bankruptcy (prior to it being declared unconstitutional).

Michigan is one of a few states that has a bankruptcy-specific exemption statute available to bankruptcy debtors only.  In the Western District of Michigan, the constitutionality of the bankruptcy-specific scheme was called into doubt by the Hon. James D. Gregg in In re Pontius, 421 B.R. 814 (Bankr. W.D. Mich. 2009) and the Hon. Jeffrey R. Hughes in In re Wallace, 347 B.R. 626 (Bankr. W.D. Mich. 2006).  Contrarily, the Hon. Scott W. Dales, held that the bankruptcy-scheme was constitutional in In re Schafer, 428 B.R. 720 (Bankr. W.D. Mich. 2010), pursuant to Sixth Circuit precedent and Congress' delegation of power to the states pursuant to 11 U.S.C. § 522(b) to create bankruptcy exemptions.

The Sixth Circuit Court of Appeals recently affirmed a decision of the United States District Court for the Southern District of Ohio based upon the District Court's holding that the automatic stay does not prevent the issuance of injunctive relief.

The local rules for the Bankruptcy Court for the Western District of Michigan have been amended, effective August 1, 2012.  The new rules can be found here in their entirety.

A redline version of the rules, showing the amendments, can be found here. (We have identified that the following link is no longer active, and it has been removed)

Among other changes, practitioners should review the following amendments: