646 B.R. 516
Bankr. W.D. Wash.2021Background
- Debtors Billie and Carla Shippy filed Chapter 13 on June 10, 2022 and claimed a Tacoma residence as homestead. Property value $441,169; deed of trust $141,709; claimed homestead $299,460.
- Boeing recorded a $71,635.19 lien based on an L&I Order and a Warrant for overpaid workers’ compensation benefits (L&I Order issued May 18, 2016; warrant filed/recorded in 2018).
- Debtors moved to avoid the lien under 11 U.S.C. § 522(f) on exemption-impairment grounds. Boeing argued the lien is a statutory lien and not avoidable under § 522(f).
- The lien impaired the homestead (liens + exemption > property value); impairment was undisputed.
- Washington law requires administrative proceedings (L&I, BIIA, possible superior court review) to become final before a warrant may be filed and docketed as a lien. The court concluded that process occurs before the lien arises.
- Court held the lien is a judicial lien (arising from legal/administrative process) and avoidable in full under § 522(f).
Issues
| Issue | Plaintiff's Argument (Shippy) | Defendant's Argument (Boeing) | Held |
|---|---|---|---|
| Whether Boeing’s recorded L&I warrant is a "judicial lien" under §101(36) and thus avoidable under §522(f) | The L&I Order/Warrant functions as a judgment/judicial lien and is avoidable because it impairs the homestead exemption | The lien arises solely by statute (a statutory lien) upon docketing and therefore is not avoidable under §522(f) | Court: Lien is a judicial lien—administrative/judicial process precedes and produces the final order that permits docketing—so it is avoidable under §522(f) |
| Whether the timing/nature of administrative/judicial process matters (i.e., must the adjudicative process occur before lien arises) | The statutory scheme here required final administrative adjudication before a warrant/li en could be docketed; thus process preceded lien | Boeing treated the docketed warrant as the operative statutory creation of the lien regardless of prior process | Court: Timing matters—when adjudicative process occurs before docketing, the lien arises from that legal process (judicial lien), not automatically by statute |
Key Cases Cited
- Culver, LLC v. Chiu (In re Chiu), 304 F.3d 905 (9th Cir. 2002) (elements required to avoid a lien under §522(f))
- Owen v. Owen, 500 U.S. 305 (1991) (test for impairment of an exemption by a lien)
- In re Schick, 418 F.3d 321 (3d Cir. 2005) (certificate docketed by clerk that arises without prior adjudicative process is a statutory lien)
- Matter of Mance, 31 F.4th 1014 (7th Cir. 2022) (administrative/quasi‑judicial procedures preceding lien formation render it a judicial lien)
- In re Smith, 401 B.R. 674 (Bankr. E.D. Pa. 2009) (liens that arise automatically under statute before adjudicative proceedings are statutory liens)