In Re Corio
- Reporters:
- , , ,
- Before:
- Wexler
MEMORANDUM AND ORDER
WEXLER, District Judge.
Debtor-appellant Joseph A. Corio appeals from an order of the United States Bankruptcy Court for the Eastern District of New York, Robert J. Hall, Bankruptcy Judge, dated February 1, 1995, denying his motion pursuant to
BACKGROUND
On December 21,1993, Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code. By motion, Debtor sought to avoid certain judicial hens pursuant to Bankruptcy Code
Star Video Entertainment, Inc. $7,971.68
Household Retail Service Inc. $5,707.38
Fidelity New York $7,435.37
Artel Distributing, Inc. $5,439.60
The bankruptcy court denied Debtor’s motion, basing its decision entirely on an earlier decision of that court, In re Giordano, 177 B.R. 451 (Bankr.E.D.N.Y.1995), without further explanation. Under the Giordano decision, it would appear that the bankruptcy court denied the motion because: (1) Debtor was not entitled to the New York homestead exemption, since he had no equity in the Property, and, therefore, there was .no exemption that could be impaired by the judicial hens; and (2) judicial hens do not impair the New York homestead exemption under CPLR § 5206(a)(1).
DISCUSSION
Bankruptcy Code
Recognizing that prebankruptcy judicial liens, if not avoided by the debtor or trustee, may continue to encumber the debtor’s exempt property if the property passes through bankruptcy, Congress enacted Bankruptcy Code
Even assuming that a judicial hen may impair the New York homestead exemption under CPLR § 5206(a), that exemption is not available to Debtor. The plain language of the statute indicates that the exemption apphes to a debtor’s “equity” in the property,
i.e.,
“value above hens and encumbrances,” although not exceeding $10,000.
Id.
(emphasis added);
see also
Practice Commentary to CPLR § 5206, C5206:2 (McKinney 1978) (“In calculating the exemption of $10,000 to which the judgment debtor is entitled for a principal residence, it is the debt- or’s equity which is looked to. This is of course what CPLR § 5206(a) means when it, excludes ‘hens and encumbrances’ from the measure.”). Thus, if the debtor has no equity in the property, he is not entitled to the homestead exemption under CPLR § 5206(a), made appheable to a New York debtor’s bankruptcy by Bankruptcy Code
Debtor relies on the Second Circuit’s decision in In re Brown, 734 F.2d 119 (2d Cir.1984), which held that “a judicial lien is avoidable even where the debtor lacks equity in the property.” Id. at 125. Brown, however, decided before New York “opted out” of the federal exemption scheme, involved a New York debtor who was permitted to void a judicial lien on surplus funds (resulting from a prebankrupfcy foreclosure sale of his residence) to allow him to enjoy a federal exemption, not the New York homestead exemption. 6 In Brown, the Second Circuit stated:
Nearly all of the courts that have construed [§ 522(f)(1) ] have concluded that it should be applied according to its terms. That is, the debtor is permitted, even if he lacks an equity interest in the property, to avoid the fixing of a judicial lien on the property if that avoidance would allow him to enjoy an exemption provided by§ 522(b) . This interpretation is supported *501 by the legislative history of the Code. Congress plainly expressed its intent to protect a debtor’s ability to exempt property under§ 522(d) by providing that a debt- or may avoid any judicial hen under§ 522(f)(1) “to the extent that the property could have been exempted in the absence of the hen.”
Id. (citations omitted). It is apparent from this passage that, under Brown, the federal exemption may he even in the absence of an equity in the property where the property could have been exempt in the absence of the “judicial hen” — the hen asserted in that case against the surplus funds by a judgment creditor. 7 Brown does not require, as Debt- or suggests, that the New York homestead exemption under CPLR § 5206(a) is available to a New York debtor to the extent that the property could have been exempt in the absence of the “consensual mortgage hens.” Rather, the New York homestead exemption is not available to a New York debtor if the value of the property does not exceed “hens and encumbrances.” Even absent the judicial hens on Debtor’s property, Debtor would not be entitled to the homestead exemption under CPLR § 5206(a), since its value does not exceed “hens and encumbrances” to any extent. 8
In any event, based on this Court’s decision in Alu v. New York Dep’t of Taxation & Finance, 41 B.R. 955 (E.D.N.Y.1984), this Court beheves that the judicial hens asserted by Debtor do not impair any exemption which would otherwise exist.
Because the Debtor was not entitled to the homestead exemption, since he had no equity in the Property, and because the judicial hens do not impair any exemption which would otherwise exist, the bankruptcy court’s order is affirmed,
CONCLUSION
For the above reasons, the bankruptcy court’s order is affirmed. The Clerk of the Court is directed to close the file in this matter.
SO ORDERED.
Notes
. D & CL § 284 provides: “In accordance with the provisions of [Bankruptcy Code
. At the time Debtor commenced his case under Title 11
(i.e.,
December 21, 1993), Bankruptcy Code
. D & CL § 282 provides, in relevant part: “Under [Bankruptcy Code
.CPLR 5206(a)(1) provides:
Real property exempt from application to the satisfaction of money judgments
(a) Exemption of homestead. Property of one of the following types, not exceeding ten thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof:
1. a lot of land with a dwelling thereon-N.Y.Civ.Prac.L. & R. § 5206(a)(1) (McKinney Supp.1995).
. At the time Debtor commenced his case under Title 11, Bankruptcy Code
(0 Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in properly to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is—
(1) a judicial lien....
11 U.S.C. § 522(f)(1) . Section 303 of the Bankruptcy Reform Act of 1994 amended§ 522(f) . However, pursuant to § 702 thereof, the amendment to this subsection applies to cases under Title 11 commenced on or after October 22, 1994, the Act’s effective date, not to cases filed before, as here.
. Debtor also relies on a case cited by
Brown, In re Chesanow,
25 B.R. 228 (Bankr.D.Conn.1982).
Chesanow,
however, arose in Connecticut where the debtor was entitled to choose the federal homestead exemption of
. Similarly, the Supreme Court in
Owen v. Owen,
500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991), held that in determining whether a debt- or may avoid a judicial lien under Bankruptcy Code
We have no doubt, then, that the lower courts’ unanimously agreed-upon manner of applying§ 522(f) to federal exemptions — ask first whether avoiding the lien would entitle the debtor to an exemption, and if it would, then avoid and recover the lien — is correct.
Id. at 312-13, 111 S.Ct. at 1837.
. Debtor refers this Court to the recent amendments to