469 B.R. 74
Bankr. D.N.M.2012Background
- Debtors filed Chapter 13 on March 8, 2010; Gould objected to exemptions and the Trustee objected to Schedule C amendments.
- Española Property is jointly considered; Rosina Martinez is asserted to have a $60,000 homestead exemption; Eloy Martinez seeks a $60,000 exemption as well.
- Gould’s lien was $85,000, recorded before and after transfers; the lien is argued to impair exemptions under 11 U.S.C. § 522(f).
- Property value is stipulated at $168,000 (residence $130,000 and adjacent lot $38,000); petition date controls impairment analysis.
- Improvements totaling about $18,000 were made with funds possibly belonging to Eloy/Martinez family, claimed to boost value; extent of value increase contested.
- A stipulation resolved several issues, including Rosina’s exemption and Gould’s allowed claim, with Eloy’s exemption unresolved at the time of decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Eloy is entitled to a homestead exemption in the Española Property | Eloy asserts an equitable lien entitlement and/or ownership interestJustification from post-petition transfers. | Court should construe NM §42-10-9 to require ownership/lease/purchase by claimant; equitable lien alone is insufficient. | Eloy not entitled to a homestead exemption. |
| Whether Eloy’s asserted equitable lien can support an exemption under 522(f) | Equitable lien increases property value and is includable. | Equitable lien does not create ownership or a qualifying interest for exemption under NM law. | Equitable lien not includable for §522(f) impairment. |
| Whether Gould’s judicial lien impairs the Debtors’ homestead exemption under §522(f)(2)(A) | Lien, plus other liens and exemption, exceed property value, impairing exemption. | Even with a hypothetical $18,000 equitable lien, total liens do not exceed the exemption against the property value. | Gould’s lien does not impair the homestead exemption. |
| What is the controlling property value and the exempt amount for impairment analysis | Value fixed at $168,000; Rosina’s exemption $60,000; Eloy’s potential $60,000 excluded as not allowed. | Value and exemptions as stipulated; impairment depends on petition-date values. | As of filing, total liens ($85,000 + possible $18,000) plus exemption ($60,000) = $163,000, below $168,000, so no impairment. |
Key Cases Cited
- Nesset v. Blueher Lumber Co. (In re Nesset), 33 B.R. 326 (Bankr.N.M.1983) (equitable ownership can support exemption, but equitable lien alone does not)
- In re Kolich, 328 F.3d 406 (8th Cir. 2003) (11 U.S.C. § 522(f) impairment must be computed literally, including junior liens)
- In re Brinley, 403 F.3d 415 (6th Cir. 2005) (11 U.S.C. § 522(f) impairment computation directs inclusion of liens)
- In re Farnsworth, 384 B.R. 842 (Bankr.D.Ariz.2008) (lien impairment determinations measured as of petition date)
- In re Levinson, 372 B.R. 582 (Bankr.E.D.N.Y.2007) (petition date as operative for § 522(f) determinations)