David G. Waltrip, LLC v. Ruby Sawyers, 20-1130

Waltrip obtained a consent judgment in Missouri state court creating a judicial lien on Sawyers’s homestead for a principal of $234,123.31 (total including interest/costs $256,739.31).
Before the lien attached, Sawyers’s house was heavily damaged by fire; she received $132,392.99 in insurance proceeds designated for repairs but had not repaired the home before filing bankruptcy.
On the Chapter 7 petition date Sawyers’s unrepaired home was appraised at $3,000–$6,000. She claimed a $15,000 Missouri homestead exemption and did not avoid Waltrip’s lien during the original case; the case closed in July 2017.
After the case closed Waltrip attempted a sheriff’s sale; Sawyers successfully moved to reopen her bankruptcy and sought avoidance of Waltrip’s judicial lien under 11 U.S.C. § 522(f).
The bankruptcy court avoided Waltrip’s entire lien; the BAP affirmed; Waltrip appealed arguing the insurance proceeds should be included in the homestead valuation and seeking costs/fees for the reopening and sheriff’s sale.
The court affirmed: FMV of the damaged property on the petition date (excluding insurance proceeds) controlled, the lien impairment exceeded the lien amount so the lien was wholly avoidable, and the denial of Waltrip’s fees was not an abuse of discretion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Valuation date/value of homestead	Include $132,392.99 insurance proceeds in homestead value	Use fair market value of damaged property on petition date (exclude proceeds)	Court: FMV as of petition date controls; do not include insurance payout ($3,000–$6,000 used)
Extent of impairment under § 522(f)(2)(A)	Lien should not be fully avoided if proceeds counted	Applying statutory formula with petition-date FMV yields impairment greater than lien	Court: Using FMV, impairment ($272,500.27–$275,500.27) exceeds Waltrip’s lien; entire lien avoided
Reopening timeliness and award of fees/costs	Reopening was untimely (14 months) and Sawyers should pay costs for sheriff’s sale and reopening	Reopening was allowed; Waltrip waived objection by not timely opposing and did not timely seek fees	Court: Reopening discretionary; Waltrip failed to preserve prejudice argument and fee award denial was not abuse of discretion

BFP v. Resolution Tr. Corp., 511 U.S. 531 (establishes fair market value as of petition date for bankruptcy valuation)
In re Kolich, 328 F.3d 406 (uses FMV for lien-avoidance calculations under § 522)
In re O’Sullivan, 914 F.3d 1162 (standard of review for bankruptcy appeals)
In re Benn, 491 F.3d 811 (Missouri opted out of § 522(d) federal exemptions; state exemptions govern)
In re Shelby, 232 B.R. 746 (Missouri bankruptcy court recognizing debtor may retain insurance proceeds tied to exempt property)
Matter of Swift, 129 F.3d 792 (Fifth Circuit treating insurance proceeds as substitute for lost exempt property under Texas law)
In re Burns, 482 B.R. 164 (contrasting treatment of insurance/settlement proceeds under different state-law contexts)