Other than a judicial lien securing a domestic support obligation, a debtor may avoid a lien that impairs an exemption under Section 522(f), even if the lien secures a nondischargeable debt, according to an opinion by Bankruptcy Judge Alan M. Koschik of Akron, Ohio.
The chapter 7 debtors owned a home worth about $240,000. They claimed a homestead exemption covering the entire value of the home. No one objected to the debtors’ homestead exemption.
There were two judicial liens on the home totaling about $125,000. Both judicial liens were held by the same creditor, who claimed that the debts securing the liens were nondischargeable. The creditor had filed an adversary proceeding to declare the debts nondischargeable.
The debtors filed a motion to avoid both judicial liens under Section 522(f)(1). The section allows a debtor to
avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is — (A) a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523(a)(5).
As Judge Koschik said in his September 21 opinion, Section 523(a)(5) “refers to liens securing debts for domestic support obligations.” The liens to be avoided did not secure domestic support obligations.
The judicial lienholder nonetheless objected to avoiding the liens, reasoning that a lien cannot be avoided when the underlying debt is nondischargeable.
Judge Koschik decided to rule on avoiding the liens before resolving the adversary proceeding about dischargeability.
Focusing on Section 522(f), Judge Koschik said:
The fact that the statute expressly makes liens securing one specific category of debts, domestic support obligations, immune to avoidance pursuant to 11 U.S.C. § 522(f)(1) strongly suggests that liens securing other categories of debts . . . are not so immunized.
To the same effect, Judge Koschik said that the “Supreme Court frequently relies, with some caveats, on the interpretive canon expressio unius est exclusio alterius, ‘expressing one item of an associated group excludes another left unmentioned.’ [Citation omitted.]”
“[T]he circumstances here clearly support such an inference,” Judge Koschik said. He added:
If Congress had meant to exclude other categories of debts from lien avoidance pursuant to section 522(f), it would have done so, just as it excluded other categories of debts from the prohibition against recovering from a debtor’s exempt property in the first place. See 11 U.S.C. § 522(c) (excluding nondischargeable tax and domestic support claims . . . from the prohibition against attachment and collection with respect to a debtor’s exempt assets, but not excluding other nondischargeable claims, including the type the Creditor is pursuing in the Adversary Proceeding).
Quoting recently retired Bankruptcy Judge David R. Duncan of South Carolina, Judge Koschik decided that “‘the alleged nondischargeability of [the debtor’s] debt is immaterial to a determination of his lien’s avoidability.’” In re Hunnicutt, 457 B.R. 463, 465 (Bankr. D.S.C. 2011).
Judge Koschik found three “cases [that] have denied motions to avoid judicial liens pursuant to section 522(f) when the underlying debt was nondischargeable.” However, he said that two of the three cases were decided before the 1994 amendments, which added the exclusion for domestic support obligations. Furthermore, he said that all three cases
relied on equitable principles based on facts specific to those cases that the Court finds both inapplicable to the facts of this case and, more important, unable to overcome the statutory language of section 522(f)(1) establishing that the only category of judicial liens that cannot be avoided due to the nondischargeability of the underlying debt are those that “secure[] a debt of a kind that is specified in section 523(a)(5).”
Judge Koschik granted the motion to avoid the judicial liens.
Other than a judicial lien securing a domestic support obligation, a debtor may avoid a lien that impairs an exemption under Section 522(f), even if the lien secures a nondischargeable debt, according to an opinion by Bankruptcy Judge Alan M. Koschik of Akron, Ohio.
The chapter 7 debtors owned a home worth about $240,000. They claimed a homestead exemption covering the entire value of the home. No one objected to the debtors’ homestead exemption.
There were two judicial liens on the home totaling about $125,000. Both judicial liens were held by the same creditor, who claimed that the debts securing the liens were nondischargeable. The creditor had filed an adversary proceeding to declare the debts nondischargeable.