The debtor was not required to file her motion to avoid a judicial lien while her case was still open, and to assert a homestead exemption in Oklahoma, the debtor need only reside on the property. In re Rose-Brownfield, 2021 WL 809767, No. 18-80342 (Bankr. E.D. Okla. Feb. 22, 2021). Read More
Tag Archive: lien avoidance
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No Deadline for Lien Avoidance Motion
Posted by NCBRC - May 21st, 2021
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Lien for Incarceration Costs Is Avoidable Judicial Lien
Posted by NCBRC - December 23rd, 2020
The State Treasurer’s lien based on a statute authorizing the state to seek reimbursement from a prisoner for the costs of his incarceration was not a statutory lien but a judicial lien which the debtor could avoid as impairing his exemptions. State Treasurer v. Wigger, No. 19-732 (W.D. Mich. Nov. 16, 2020).
The debtor was a prisoner in the Central Michigan Correctional Facility. The Michigan State Treasurer sought to recover some of the costs of his incarceration under the State Correctional Facility Reimbursement Act (SCFRA). After a bench trial, the state court found the State Treasurer was entitled to reimbursement from the debtor’s IRA funds and from proceeds from a judgment the debtor had against his son. The debtor initiated a chapter 7 bankruptcy and filed an adversary proceeding seeking to have the state’s lien voided as a judicial lien impairing his exemptions under section 522(f)(1). The bankruptcy court granted the debtor’s lien avoidance motion finding that the lien impaired his exemption for retirement funds under section 522(d)(12), and his exemption for property valued up to $13,100 under section 522(d)(5). Read More
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Ninth Circuit Ties Itself in Knots to Affirm Lien Avoidance Dismissal
Posted by NCBRC - April 4th, 2020
In an unusual path, the Ninth Circuit affirmed the bankruptcy court’s dismissal of the debtor’s lien avoidance action where it found the underlying lien, based on an abstract of judgment which did not “substantially comply” with state requirements, to be invalid. Sanger v. Ahn (In re Ahn), No. 18-16794 (9th Cir. Feb. 28, 2020) (unpublished).
Ms. Ahn filed an adversary complaint in her bankruptcy seeking declaratory judgment that the Sangers’ lien was invalid because it was based on an abstract of judgment which did not comply with state law notice requirements. In the alternative, Ms. Ahn sought to avoid the judicial lien as impairing her homestead exemption. The bankruptcy court granted summary judgment to Ms. Ahn on the declaratory judgment count and dismissed the lien avoidance claim as moot.
On appeal, the district court found that the bankruptcy court lacked subject matter jurisdiction to reach the declaratory judgment claim and reversed that holding. Rather than remanding to the bankruptcy court to address the issue of lien avoidance, however, the district court instead went on to determine that the underlying judicial lien was invalid and, therefore, the debtor’s homestead exemption was not impaired under section 522(f). The district court, therefore, affirmed the bankruptcy court’s dismissal of the lien-avoidance claim. Read More
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Federal Lien Broader than State Lien for Avoidance Purposes
Posted by NCBRC - March 2nd, 2019
Federal law defines a lien more broadly than Missouri law, and for that reason, the debtor was able to avoid a judgment lien as impairing the exemption he claimed on his residence, which he owned as a tenancy in the entireties with his wife, even though state law did not recognize the creation of the lien. CRP Holdings A-1, LLC v. O’Sullivan, No. 17-3226 (8th Cir. Feb. 1, 2019).
Chapter 7 debtor, Casey O’Sullivan, and his wife acquired their residence as tenants in the entirety. CRP obtained a foreign judgment in the amount of $765,151.18 against the debtor and registered the judgment in the debtor’s resident county in an effort to obtain a judicial lien against the property. When Mr. O’Sullivan filed for bankruptcy, he claimed an exemption for the property and sought to avoid CRP’s judicial lien under section 522(f)(1) as impairing that exemption. The bankruptcy court found that the judgment lien, even though unenforceable, placed a “cloud” on the debtor’s title and could therefore be avoided as impairing his bankruptcy exemption. The BAP affirmed. Read More
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Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property
Posted by NCBRC - October 24th, 2018
A debtor seeking to avoid a lien as impairing a homestead exemption must calculate the impairment using his proportionate interest in the property and the sum of the corresponding mortgage liens in proportion to that interest. Sandoval Irrevocable Trust v. Taylor, No. 17-1241 (10th Cir. Aug. 14, 2018).
As a result of Mark Taylor’s misappropriation of funds from an Irrevocable Trust for which he was trustee, the Trust (Sandoval) obtained state court judgments against him and liens against his residence. Mr. Taylor filed for chapter 13 bankruptcy and listed the property, which he co-owned with his ex-wife, as having a total value of $560,000 with his portion amounting to $280,000. He later converted his case to chapter 7 and moved to avoid the judgment liens as impairing his state homestead exemption of $37,500. Read More
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Rooker-Feldman No Bar to Exercise of Trustee’s Strong-Arm Power
Posted by NCBRC - July 23rd, 2018
The Sixth Circuit agreed with the position advanced in NACBA / NCBRC’s amicus brief that the Rooker-Feldman doctrine does not preclude application of the trustee’s strong-arm power to avoid a lien notwithstanding a state court judgment of foreclosure. Isaacs v. DBI-ASG Coinvestor Fund III, LLC (In re Isaacs), No. 17-5815 (6th Cir. July 18, 2018).
Linda Isaacs and her husband entered into a mortgage agreement with GMAC Mortgage Corporation. The contract provided in the “description of security,” that “By signing this Mortgage, we hereby mortgage, grant and convey [the collateral],” and, in the “priority of advances” section, that “The lien of this Mortgage will attach on the date this mortgage is recorded.” Shortly after signing the agreement, Ms. Isaacs filed for chapter 7 bankruptcy. She scheduled GMAC as a secured creditor not realizing that it had not yet recorded the mortgage. GMAC recorded the mortgage while the automatic stay was in effect. Ten years after Ms. Isaacs obtained her chapter 7 discharge, the successor to GMAC, sought an order of foreclosure against the Isaacs. The state court issued a default order of foreclosure and, one day before the scheduled sale, Ms. Isaacs filed for chapter 13 bankruptcy. Read More
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Mortgage Deficiency Judgment Liens Are Avoidable
Posted by NCBRC - July 24th, 2017
Section 522(f)(2)(C) does not create an exception to lien avoidance for mortgage deficiency judgment liens. In re Pace, No.16-8036 (B.A.P. 6th Cir. June 20, 2017).
Antoinette Pace filed a chapter 13 petition in which she scheduled her residence with a value of $147,630 and claimed a homestead exemption in the amount of $132,900. At that time, Farmers National Bank (FNB) held two judicial liens resulting from post-foreclosure deficiency judgments (though the two liens appeared duplicative, the bankruptcy court and the BAP treated them as separate liens). There were also two liens on the house held by Midland Credit Management (MCM) and Matthew Giannini, as well as a county lien against the property for unpaid real estate taxes. Ms. Pace converted to chapter 7 and moved to avoid the non-tax liens as impairing her homestead exemption. The motion was unopposed. The bankruptcy court granted the motion to avoid the MCM and Giannini liens, but denied the motion to avoid the liens held by FNB. Read More
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Avoiding a Lien Requires that the Lien Exist
Posted by NCBRC - November 29th, 2016
Where the creditor sought to establish a judicial lien against the debtor’s interest in a tenancy in the entirety the threshold question is not whether the lien impairs the homestead exemption and may be avoided under section 522(f)(1), but whether a lien has been created at all. CRP Holdings v. O’Sullivan, No. 16-1526 (8th Cir. Nov. 14, 2016).
CRP obtained a default judgment against Casey Drew O’Sullivan and, attempting to secure a judicial lien on his real property, filed a notice of foreign judgment in the county where Mr. O’Sullivan’s residence was located. Mr. O’Sullivan filed for chapter 7 bankruptcy and claimed the property, which he owned as tenants in the entirety with his wife, as his homestead. The bankruptcy court sustained Mr. O’Sullivan’s motion to avoid the judicial lien. The BAP affirmed, finding that while CRP’s lien may not have been enforceable, it could still be avoided. In re O’Sullivan, 544 B.R. 407 (B.A.P. 8th Cir. 2016). Read More
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Trustee May Not Reform Avoided Mortgage
Posted by NCBRC - February 6th, 2015
While a trustee has leeway to compromise an avoidance claim under bankruptcy law, he does not have the right to change the terms of an avoided mortgage to make it more marketable for sale or settlement. In re Dupuis, No. 12-30380 (Bankr. D. Mass. Jan. 8, 2015). Read More
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Denial of Motion to Reopen to Amend Exemption Was Abuse of Discretion
Posted by NCBRC - February 4th, 2015
The bankruptcy court abused its discretion when it refused to reopen the debtor’s chapter 7 case to permit him to amend his schedules to claim his homestead exemption and seek avoidance of judicial liens. Ludvigsen v. Osborne (In re Ludvigsen), No. 14-39 (B.A.P. 1st Cir. January 16, 2015). Read More
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