In an expansive reading of the homestead exemption cap added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the First Circuit Court of Appeals, in Larson v. Howell, held that criminal negligence is sufficient to trigger the section 522(q)(1)(B)(iv) homestead exemption cap. 513 F.3d 325, 328 (1st Cir. 2008). In Larson v. Howell, Larson was found guilty of negligent vehicular homicide. In Larson’s bankruptcy case, the homestead exemption cap was applied because the debt arose from a criminal act. Id. at 327. The Court of Appeals reasoned that the cap should apply to Larson because (1) criminal acts are separate triggers of the subsection, (2) the debtor need not be convicted of the crime, and (3) Congress did not intend a conviction to be necessary in order to trigger the cap. Id. at 328–30.
The BAPCPA provision, section 522(q)(1)(B)(iv) of the Bankruptcy Code, applies a homestead exemption cap to Larson because her debt arose from negligent vehicular homicide. Section 522(q)(1)(B)(iv) applies a $136,875 cap on the homestead exemption where the “debtor owes a debt arising from any . . . criminal act, intentional tort, or willful or reckless misconduct.” 11 U.S.C. §522 (2008), amended by 11 U.S.C. §522(q) (2007) (raising the dollar amount of the cap from $125,000 to $136,875 for cases commenced after April 1, 2007). In Larson, the debtor was driving her van in Massachusetts and took a shortcut through a parking lot, striking the oncoming motorcycle of Howell. Howell’s wife, a passenger, died as a result of the accident. In the criminal case, the judge found facts sufficient to find Larson guilty of negligent vehicular homicide. Larson v. Howell, 513 F.3d 325, 327 (1st Cir. 2008).
Larson then filed for Chapter 7 bankruptcy and in the bankruptcy proceeding, the Court of Appeals determined that the homestead exemption cap should be applied to Larson’s homestead exemption because the debt arose from a criminal act. The court used three factors to come to its conclusion. First, the Court of Appeals reasoned that use of the word “or” in the section 522(q)(1)(B)(iv) list of triggering acts indicates that criminal acts are separate triggers to the subsection, independent of any intent or recklessness. Id. at 328. Second, the court determined that the debtor need not be convicted of the crime, holding that section 522(q)(1)(B)(iv) applies “wherever the debtor’s debt arises from . . . any criminal act.” Id. at 330. Therefore, the provision is triggered whenever one admits to facts sufficient for a finding of guilt, as Larson did. Thirdly, the court employed statutory construction and reasoned that since Congress requires a conviction in section 522(q)(1)(A), the fact that such language requiring a conviction was not used in section 522(q)(1)(B)(iv) clearly shows that Congress did not intend it to be a prerequisite to initiating the cap on the homestead exemption. The court concluded that the cap on the homestead exemption applies to Larson because her act was a negligent crime and her debt to Howell arose from that criminal act.