482 B.R. 899
Bankr. N.D. Ill.2012Background
- Debtors Phillip and Noreen Harris filed a voluntary Chapter 13 petition on March 27, 2012.
- Subject Property is homestead at 2601 E. 92nd Street, Chicago, valued at $144,300 per Zillow.
- Mortgage balance at petition date was $164,957, creating equity deficiency.
- Debtors claimed a homestead exemption of $15,000 under 11 U.S.C. § 522(b)(3) and Illinois law.
- Creditor United Credit Union had obtained a monetary judgment of $10,732.12 about nine months before filing and a lien was fixed on the Subject Property.
- Payoff to Creditor at filing was $7,425.25; Debtors moved to avoid the judicial lien on July 30, 2012; Creditor conceded lien is avoidable but asked for discharge before release.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When is a § 522(f) lien avoided effective? | Harris | Harris | Lien avoidance is conditioned on discharge (not immediate). |
| Does § 349(b)(1)(B) protection affect timing of lien avoidance? | Harris | Harris | Courts may consider protection to creditors; avoid unless discharge achieved. |
| Should the lien avoidance order be filed of record before discharge? | Harris | Harris | Order should not be filed until discharge; lien release delayed. |
Key Cases Cited
- In re Prince, 236 B.R. 746 (Bankr. N.D. Okla. 1999) (majority view allowing lien avoidance contingent on discharge for 349 protection)
- In re Stroud, 219 B.R. 388 (Bankr. M.D.N.C. 1997) (avoidance conditioned on discharge; proceeds held in escrow if needed)
- In re King, 290 B.R. 641 (Bankr. C.D. Ill. 2003) (lien avoidance contingent on discharge; discusses plan completion)
- Lee Servicing Co. v. Wolf, 162 B.R. 98 (Bankr. D.N.J. 1993) (lien avoidance tied to plan completion and discharge)