                         RECOMMENDED FOR FULL-TEXT PUBLICATION
                              Pursuant to Sixth Circuit Rule 206
                                      File Name: 12a0274p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                                X
                                                 -
 IN RE: STEVEN M. SCHAFER,
                                                 -
                                Debtor.
 _____________________________________           -
                                                 -
                                                     Nos. 11-1340/1387

                                                 ,
                                                  >
                            Trustee-Appellee, -
 THOMAS C. RICHARDSON,

                                                 -
                                                 -
           v.
                                                 -
                                                 -
     Debtor-Appellant (11-1340 & 11-1387), -
 STEVEN M. SCHAFER,

                                                 -
                                                 -
                                                 -
 STATE OF MICHIGAN,
              Intervenor-Appellant (11-1340). N
                   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.




        *
         The Honorable Harry S. Mattice, Jr., United States District Judge for the Eastern District of
Tennessee, sitting by designation.


                                                  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


        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 bankruptcy-
specific 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

        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.
Nos. 11-1340/1387          In re Schafer                                                        Page 4


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



         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.
Nos. 11-1340/1387          In re Schafer                                                          Page 5


                                           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 bankruptcy-
specific 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



         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.
Nos. 11-1340/1387         In re Schafer                                                        Page 6


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.


        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.
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 bankruptcy-
specific 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


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.


         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.
Nos. 11-1340/1387           In re Schafer                                                            Page 16


         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

         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.
Nos. 11-1340/1387      In re Schafer                                              Page 17


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


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.



        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.
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.
