Lien Avoidance

LIEN AVOIDANCE § 522(f) and 506(d)

In re Meyer, 373 B.R. 84 (9th Cir. BAP 2007)

“[W]e hold that consensual liens against the entire fee must be netted out before computing

the value of a debtor’s fractional interest for purposes of avoiding judgment liens on which the coowner

is not liable.”

In re Concannon, 338 B.R. 90 (9th Cir. BAP 2006)

Section 506(d) cannot be used by a chapter 7 debtor to strip off a wholly unsecured

nonconsensual lien.

In re Charnock, 318 B.R. 720 (9th Cir. BAP 2004)

Plain meaning of § 522(f) required avoidance of judicial lien that was senior to a

consensual lien.

In re Darosa, 318 B.R. 871 (9th Cir. BAP 2004)

Mathematical formula for avoiding liens under § 522(f) cannot be altered to provide for

potential subrogation between two judgment debtors in the future. It must be applied as written.

In re Villar, 317 B.R. 88 (9th Cir. B.A.P. 2004)

Service of a motion to avoid a judicial lien upon the creditor’s P.O. box was insufficient

under Bankruptcy Rule 7004(b)(3).

In re Zimmer, 313 F.3d 1220 (9th Cir. 2002)

A wholly unsecured lienholder is not entitled to the protections of § 1322(b)(2); The

holding of In re Lam, 211 B.R. 36 (9th Cir. B.A.P. 1997) approved.

In re Chiu, 304 F.3d 905 (9th Cir. 2002)

Debtor who owned their house at the time a judgment lien was a fixed to it could avoid the

lien, even though they no longer owned the house at the time the motion was filed.

In re Watts, 298 F.3d 1077 (9th Cir. 2002)

Overruling In re Jones, 106 F.3d 923 (9th Cir. 1997), a judgment lien attaches to a declared

homestead regardless of whether there is surplus equity at the time the abstract of judgment is

recorded.

In re Pederson, 230 B.R. 158 (9th Cir. B.A.P. 1999)

judgment lien that attached by virtue of preexisting judgment when debtor acquired

homestead property was not avoidable.

In re Pike, 243 B.R. 66 (9th Cir. B.A.P. 1999)

Debtor’s pre-bankruptcy homestead declaration not relevant in context of bankruptcy

proceedings.

In re Been, 153 F.3d 1034 (9th Cir. 1998)

Under California law a non-judicial foreclosure sale by a senior lien holder terminates a

“sold-out” junior lienholder’s secured interest in the debtor’s property and any remaining rights

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which might ‘arise out of’ the foreclosure proceedings. Thus §522(f)(c) didn’t apply.

In re Toplitzky, 227 B.R. 300 (9th Cir. B.A.P. 1998)

Creditor may not retain lien against debtor’s home by paying value of debtor’s impaired

equity exemption.

In re Stoneking, 225 B.R. 690 (9th Cir. B.A.P. 1998)

Debtor may avoid lien placed on community property residence which later became

debtor’s separate property following divorce.

In re Hanger, 217 B.R. 592 (9th Cir. B.A.P. 1997), aff’d 196 F.3d 1292 (9th Cir. 1999)

Debtors may partially avoid bank’s judicial lien to extent lien impairs homestead

exemption.

In re Foss, 200 B.R. 660 (9th Cir. B.A.P. 1996)

Lien against debtor’s property created by divorce decree was not avoidable.

In re Barnes, 198 B.R. 779 (9th Cir. B.A.P. 1996)

Debtor cannot avoid former wife’s judicial liens which fixed onto debtor’s property interest

in marital home during reordering of community property.

In re Wilson, 90 F.3d 347 (9th Cir. 1996)

Where debtor had undeclared homestead that had to be paid just ahead of judicial liens in

the event of a forced sale, lien not impaired under pre-1994 law.

In re Barnes, 198 B.R. 779 (9th Cir. B.A.P. 1996)

In this pre-1994, California law matter, the debtor’s new property interest in the house was

created at the same time the November 1990 and December 1991 judgements came into being.

Therefore, the liens evidencing these judgment did not fix onto the Debtor’s reordered property

interest and § 522(f)(1) is inapplicable. The liens are not avoidable. The June 1991 sanctions

order was not directed ad dividing the community property. Therefore it did not attain lien status

until Nelson recorded it, subsequent to the division of the community property. It fixed on the

debtor’s newly acquired interest in the house and thus was avoidable in bankruptcy.

In re Higgins, 201 B.R. 965 (9th Cir. B.A.P. 1996)

Debtors who lack equity in home may avoid creditor’s judicial lien against property when

lien impairs otherwise valid exemption

In re Nielsen, 197 B.R. 665 (9th Cir. B.A.P. 1996)

When calculating surplus equity in a jointly held residence, all prior liens must be deducted

from the family of the property in its entirety, rather than from the debtor’s fractional interest. If

surplus equity exists in the property and the lien does not impair the exemption, then the lien

cannot be avoided as a preference pursuant to §522(h)

In re Hastings, 185 B.R. 811 (9th Cir. B.A.P. 1995)

Even though judicial lien fixed on property before it was claimed exempt, and even though

the lien would have priority over homestead under California law, it is still avoidable.

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In re DeMarah, 62 F.3d 1248 (9th Cir. 1995)

Debtor may not avoid a tax lien (even the penalty portion) under § 522(h) and 724

In re Morgan, 149 B.R. 147 (9th Cir. B.A.P. 1993)

Debtor’s claim of exemption made valid through lack of timely objection subject to

creditor’s challenge at lien avoidance hearing.

Nobelman v. American Savings Bank, 508 U.S. 324, 113 S.Ct. 2106 (1993)

Section 1322(b)(2) prohibits a debtor from bifurcating an undersecured homestead mortgagee’s

claim into secured and unsecured claims under § 506(a).

In re Yerrington, 144 B.R. 96 (9th Cir. B.A.P. 1992), aff’d. 19 F.3d 32 (9th Cir. 1994)

Sanderfoot applied – Alaska law – lien not avoidable.

In re Patterson, 139 B.R. 229 (9th Cir. B.A.P. 1992)

Consensual lien, judicial lien, homestead, consensual lien, judicial lien, consensual lien

The formula set forth in In re Kruger, 77 B.R. 785, 788-89 (Bankr. C.D. Cal. 1987)

provides the correct result in this case an in various other circumstances:

1. Subtract all liens from the value of the property;

2. If the total amount of the liens is equal to or less than the value of the property and there

is a judicial lien, deduct from the amount of the judicial lien the claimed exemption less the

amount of equity (if any) remaining in the property after step 1. The balance left is the amount of

the judicial lien which remains on the property;

3. If the total of the liens is greater than the value of the property and if the liens which are

equal to the value of the property are all voluntary liens, void all liens in excess of the value of the

property

4. If the total of the liens is grater than the value of the property and the judicial lien was

not voided in full in step 3, determine whether the judicial lien would be partially avoided under

§ 506(d):

a) if the judicial lien is not fully secured under § 506(a), void the unsecured portion and

subtract the amount of the exemption from the secured portion. This is the remaining amount of

the judicial lien. Then recalculate the total liens against the property (using the reduced judicial

lien) and void any lien in excess of the value of the property.

b) if the judicial lien is fully secured under § 506(a), subtract the amount of the exemption

from the amount of the judicial lien. The balance is the remaining amount of the judicial lien.

Then recalculate the total liens against the property (using the reduced judicial lien) and void any

liens in excess of the value of the property (footnotes omitted).

In re Hyman, 123 B.R. 342 (9th Cir. B.A.P. 1991), aff’d 967 F.2d 1316 (9th Cir. 1992)

1. Homestead refers to equity not a physical asset

2. Costs of sale are not included in equity calculation

In re Herman, 120 B.R. 127 (9th Cir. B.A.P. 1990)

522(f)(1) – undeclared homestead – judicial lien avoidable even if 1) no forced sale and

2) liens could not be enforced unless debtor had equity.

In re Lange, 120 B.R. 132 (9th Cir. B.A.P. 1990)

506(d) not available to debtor in Chapter 7 cases.

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In re Galvan, 110 B.R. 446 (9th Cir. B.A.P. 1990)

Unsecured portion of judicial lien cannot remain as charge against property in which

debtors have exemption rights.

In re Godfrey, 102 B.R. 769 (9th Cir. B.A.P. 1989)

A lien on real property arising from a dissolution of marriage is avoidable under §522(f)(1)

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