CRP Holdings, A-1, LLC v. O'Sullivan (In re O'Sullivan)

Citation:
No. 15-6020 (8th Cir. B.A.P. Jan. 19, 2016).
Tag(s):
Ruling:
BAP affirmed bankruptcy court's finding that 522(f)(1) permits a debtor to avoid any judicial lien, including inchoate and unenforceable lien, that "fixes" upon exempt property.
Procedural context:
In a chapter 7 case, Debtor sought to avoid judgment lien against his homestead under § 522(f)(1), which permits a debtor to avoid “the fixing of a [judicial] lien on an interest of the debtor in property.” Construing the “fixing” of a lien as temporal event, the bankruptcy court concluded that the judgment lien “affixed” to the residence and impaired the debtor’s exemptions, thus warranting entry of an order avoiding the judgment lien. The judgment lien creditor appealed.
Facts:
Debtor and his wife acquired a residence as tenants by the entirety. Subsequently, CRP obtained a judgment against the Debtor (not the wife) and recorded the judgment. Debtor thereafter filed for chapter 7 relief and, claiming a $15,000 exemption in his apportioned interest in the residence, sought to avoid CRP’s judgment lien. On appeal, CRP argued that the judgment lien did not “fix” upon Debtor’s tenant by the entirety property interest and was therefore outside the confines of § 522(f). Rejecting that argument, the BAP distinguished the broader language of § 522 from the more restrictive Missouri judgment lien statute. Under Missouri law, a judgment lien attaches only to property “liable to be sold upon execution,” and property under a tenancy by the entirety is not liable for execution for the judgment debt of one spouse without the other. However, the BAP noted, § 522(f)(1) is not limited only to liens that “attach” to property, but permits a debtor to avoid ANY judicial lien, including inchoate liens, that “fixes” upon exempt property—even unenforceable liens.
Judge(s):
Kressel, Schermer, and Nail.

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