Tag Archives: Michigan bankruptcy-specific homestead exemption

Supreme Court considers constitutionality of Michigan homestead law


Zochowski Law, PLLC, 100 E. Big Beaver Rd., Ste. 900, Troy, MI 48083

Contact:          Scott Zochowski

Office:            (248) 548-6800

Cell phone:      (248) 224-8997

Email:              scott@zlpllc.com

Date:               February 13, 2013

WASHINGTON, DC – The US Supreme Court justices will meet privately this Friday at a closed-door session to decide whether to hear a case challenging the constitutionality of a Michigan law.[1] The state law protects the homes of Michigan seniors and people with disabilities when they file for bankruptcy.[2] The Court has been asked to consider if such state laws conflict with federal law and the Constitution.

The Michigan law was upheld by the US Court of Appeals for the Sixth Circuit in August 2012.[3] A Kansas law that faced a similar challenge was found constitutional in the Tenth Circuit earlier this month [4], but related challenges are still pending in federal courts across the country.

The Michigan Attorney General has argued that special protections are needed to create a safety net for the state’s most fragile class of individuals. The Michigan law provides a homestead exemption that lets seniors and people with disabilities keep their homes if they need to file for bankruptcy to get a fresh start. Under the Michigan exemption system, each homeowner may exempt up to $35,300 of his or her interest in a residence. If the homeowner is age 65 or older or is disabled, the exemption amount is $52,925.[2]

The homeowner in this case, Mr. Schafer, became permanently disabled as an adult. His savings were quickly spent on medical bills, and his income from disability benefits was not enough to pay all of his debt. His only valuable asset is his home in a middle class neighborhood in western Michigan. He filed for bankruptcy, seeking to protect his home using Michigan’s homestead exemption law. But the bankruptcy trustee ignored the state law and attempted to sell the home.

At a recent court hearing on February 6, 2013, the trustee refused to provide details about the amount of legal fees he has amassed over the last 4 years of appeals. The trustee only confirmed “this is not a surplus case.” Scott Zochowski, the attorney for Mr. Schafer, maintains you can reasonably conclude from the trustee’s comments that if Mr. Schafer’s home is ultimately sold, any proceeds may only go toward the trustee’s legal bill and not repay any of the creditors. “On a larger scale, this case is about states’ rights to pass laws that make the homes of the elderly and disabled off limits to aggressive bill collectors,” said Mr. Zochowski.

A decision as to whether to accept the case is expected from the Supreme Court next Tuesday. Oral argument could be scheduled for later this spring.


[1] Richardson v. Schafer, US Supreme Court docket: http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-643.htm

[2] MCL 600.5451(1)(n), Michigan homestead exemption: http://www.legislature.mi.gov/%28S%285hjnv4vjk1ngfu45oln12kmy%29%29/mileg.aspx?page=GetObject&objectname=mcl-600-5451

[3] Richardson v. Schafer, US Court of Appeals for the Sixth Circuit 08/20/2012 published opinion: http://www.ca6.uscourts.gov/opinions.pdf/12a0274p-06.pdf

[4] In re Westby, US Bankruptcy Appellate Panel for the 10th Circuit, 02/04/2013 published opinion: http://bankruptcykansas.info/wp-content/uploads/2013/02/Westby-BAP10-Decision-02-04-2013.pdf



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