495 B.R. 1
8th Cir. BAP2013Background
- Debtor Patricia Ann Moore (owns 50% of family home; sole occupant; homestead) filed Chapter 7 then converted to Chapter 13; claimed Missouri $15,000 homestead exemption under Mo. Ann. Stat. § 513.475.
- A judicial judgment lien (originally against Moore) was recorded before Moore’s deed; J & M Securities acquired the judgment lien by assignment.
- ABECU holds a mortgage on the property; only 50% of that consensual lien is attributable to Moore’s interest.
- Moore moved to avoid J & M’s judicial lien under 11 U.S.C. § 522(f); bankruptcy court avoided all but $2,198.50 of the lien using the § 522(f)(2) statutory formula and Kolich precedent.
- J & M appealed, arguing Missouri’s statute (Mo. Ann. Stat. § 513.510) excepting prior causes of action from the homestead exemption prevents Moore from claiming the exemption and thus from avoiding the lien.
- Bankruptcy court and this panel rejected J & M’s state-law-exception argument and affirmed the lien-avoidance calculation under Eighth Circuit precedent.
Issues
| Issue | Plaintiff's Argument (J & M) | Defendant's Argument (Moore) | Held |
|---|---|---|---|
| Whether Missouri’s exception for prior causes of action bars Moore from claiming a homestead exemption in bankruptcy | § 513.510 excludes homestead protection for causes of action existing before acquisition, so Moore cannot claim the state homestead exemption against J & M | Federal bankruptcy law § 522(f)/(b) allows avoidance when lien impairs an exemption Moore would have had but for the lien; state exception is preempted | State-law exception cannot defeat § 522(f); Moore entitled to claim homestead and avoid lien |
| Whether § 522(f) applies where lien attached before homestead acquisition (possession requirement) | Argues lien timing and state exception prevent operation of § 522(f) | Relies on Farrey/Owen: debtor must have possessed the interest before lien attached and would be entitled to exemption but for lien | § 522(f) applies; requirement satisfied (debtor had interest before lien attached) |
| Whether states may define exemptions to permit a single creditor to defeat an exemption in bankruptcy | J & M: Missouri can limit exemptions vis-à-vis single creditors via § 513.510 | Moore: State exceptions cannot expand creditor-specific protection beyond Code’s enumerated nonavoidables; Bankruptcy Code preempts conflicting state rules | State statute cannot provide extra protections beyond Code; creditor-specific exception preempted |
| Proper calculation of impairment under § 522(f)(2) for a partial owner with other consensual liens | J & M: disputes Kolich approach and application of other liens to statutory formula | Moore: apply Eighth Circuit precedent (Kolich) and use 50% of consensual lien for Moore’s 50% interest | Court follows Kolich; uses statutory formula with 50% of other consensual lien and grants avoidance except $2,198.50 |
Key Cases Cited
- Farrey v. Sanderfoot, 500 U.S. 291 (explains debtor must have possessed interest before lien attached for § 522(f) to apply)
- Owen v. Owen, 500 U.S. 305 (state-law exceptions to homestead exemptions do not prevent § 522(f) lien avoidance)
- Kolich v. Antioch Laurel Veterinary Hospital, 328 F.3d 406 (8th Cir.) (apply § 522(f)(2) formula as written for partial ownership; controlling in Eighth Circuit)
- Patriot Portfolio v. Weinstein, 164 F.3d 677 (1st Cir.) (state exceptions for prior debts/causes do not block federal lien avoidance; applied Owen)
- Tower Loan of Mississippi, Inc. v. Maddox, 15 F.3d 1347 (5th Cir.) (state may define exempt property but avoidable liens are determined by federal law § 522(f))
- Wachovia Bank & Trust Co. v. Opperman, 943 F.2d 441 (4th Cir.) (state statute must yield to § 522(f) when in conflict)