501 B.R. 89
8th Cir. BAP2013Background
- Debtor Michael McCarthy filed Chapter 13 on April 16, 2012 and claimed a 1987 Chief Bonnevilla as his homestead, exempt under § 522(d)(1) for $16,960.
- Prepetition, Debtor hired Brevik Law for a divorce; Debtor received 401(k) funds directly from his ex-spouse and used them to buy the homestead in 2010.
- Brevik sought and obtained a state-court judgment establishing and perfecting a statutory attorney’s lien under Minn. Stat. § 481.13 on the homestead for unpaid fees; the parties agreed the lien is a statutory lien under 11 U.S.C. § 101(53).
- Debtor filed an adversary complaint invoking 11 U.S.C. §§ 522(h) and 545(2) to avoid the attorney’s statutory lien as unenforceable against Minnesota homesteads absent a written waiver.
- The bankruptcy court dismissed the adversary proceeding and denied plan confirmation, holding a Chapter 13 debtor lacks authority to exercise trustee strong-arm avoidance powers to defeat a properly perfected statutory lien; the court did not analyze whether § 522(h)’s standing requirements were met.
- Debtor appealed the dismissal; Brevik did not participate in the appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debtor had standing under § 522(h) to bring a § 545(2) action to avoid a statutory attorney’s lien | McCarthy argued he met § 522(h)’s five-part test and therefore may invoke § 545(2) to avoid the lien | Brevik argued (below) that a Chapter 13 debtor cannot exercise trustee strong-arm powers to avoid a properly perfected statutory lien (court treated as Brevik’s position) | Court of Appeals held debtor satisfied § 522(h)’s requirements and remanded for merits; bankruptcy court’s dismissal set aside |
Key Cases Cited
- Seaver v. New Buffalo Auto Sales (In re Hecker), 496 B.R. 541 (8th Cir. BAP 2013) (standard of review for bankruptcy findings and conclusions)
- Dickson v. Countrywide Home Loans (In re Dickson), 655 F.3d 585 (6th Cir. 2011) (operation-of-law transfers typically involuntary for avoidance analysis)
- LaBarge v. Benda (In re Merrifield), 214 B.R. 362 (8th Cir. BAP 1997) (articulating § 522(h) five-part standing test)
- DeMarah v. United States (In re DeMarah), 62 F.3d 1248 (9th Cir. 1995) (discussing debtor standing under § 522(h) and related avoidance powers)