552 B.R. 741
Bankr. E.D. Ark.2016Background
- Debtor Tilda Marie Chambers Leaks filed Chapter 13 on Nov. 13, 2015 and claimed all property exempt.
- Arkansas Department of Workforce Services recorded two Certificates of Overpayment (Mar. 6, 2012 and Mar. 2, 2015) asserting overpayments of unemployment benefits totaling about $2,314.98.
- Certificates recite that appeal rights were exhausted and instruct the circuit clerk to enter the certificate in the judgments docket; statute provides the certificate “shall have the force of a judgment.”
- Debtor moved to avoid the lien under 11 U.S.C. § 522(f) as a judicial lien impairing exemptions.
- Workforce Services and the Chapter 13 trustee argued the Certificates create statutory liens not subject to avoidance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Certificates are judicial liens under 11 U.S.C. § 101(36) and thus avoidable under § 522(f) | Certificates arise from administrative proceedings (appeals, tribunals, board review) and thus are judicial liens obtainable by "other legal or equitable process or proceeding" | Certificates arise "solely by force of statute" and thus create statutory liens not avoidable under § 522(f) | Court held the Certificates are judicial liens (result of administrative and appellate process) and are avoidable under § 522(f) |
Key Cases Cited
- In re Schick, 418 F.3d 321 (3d Cir.) (distinguishes statutory liens that arise automatically from statutes from liens obtained through judicial or administrative process)
- In re Braxton, 224 B.R. 564 (Bankr. W.D. Pa.) (agency-filed notices held to be statutory liens where no judicial/administrative proceeding produced liability)
- In re Smith, 401 B.R. 674 (Bankr. E.D. Pa.) (statutory scheme that creates a judgment upon mere filing produces a statutory lien)
- In re Newton, 402 B.R. 771 (Bankr. W.D. Ky.) (administrative issuance and recording provisions that do not require prior adjudication create statutory liens)