4.2 Forum Shopping

The Bankruptcy Code, in general, gives debtors the choice of using either the 11 U.S.C. § 522(d) exemptions or the exemptions available under state law.   Many states, however, have “opted out” of the federal exemption by forcing use of the state exemption.   Maryland (unlike Florida or Texas) has opted out of the federal exemptions.   (Cts. & Jud. Proc. Art. § 11-504(g)).   Thus, a Maryland debtor will be limited to preserving the existing general dollar caps.   [These general exemptions are not lavish: $11,000 per Cts. & Jud. Proc. Art. § 11-504(b)(5) and (f).]

Before the New Bankruptcy Act, debtors could relocate to jurisdictions with extensive state homestead exemptions.   Florida, for example, permitted an unlimited homestead exemption even when the acquisition of the property was with actual intent to defraud a creditor!   Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001) (debtor relocating from Tennessee.)

The New Bankruptcy Act targets debtors moving to jurisdictions to enhance their homestead exemptions.   Now, if a debtor moves domicile from one state to another within two (2) years of filing the petition, domicile for the purpose of available state exemptions shall be the state of domicile for the six (6) months immediately prior to the two (2) year window.   New Bankruptcy Act 11 U.S.C. § 522(b)(3).   Prior law looked to domicile within 180 days of filing.