Scott Jencks v. AgVantage FS (In re Jencks)

Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
6 months 2 weeks ago

Case Type:

Consumer

Case Status:

Reversed and Remanded

Citation:

24-6010 (8th Circuit, Aug 12,2025) Published

Tag(s):

Ruling:

The United States Bankruptcy Appellate Panel for the Eighth Circuit overturned a bankruptcy court’s orders denying a lien avoidance motion and dismissing a related adversary proceeding. On the lien motion, the record did not support the bankruptcy court's factual findings about the debtors’ homestead status on the petition date. And, the bankruptcy court did not apply the correct legal standard in dismissing the debtors' adversary complaint at the pleadings stage. The bankruptcy court failed to assign presumptive validity to the debtors' homestead exemption claim.

Procedural context:

The BAP's opinion discusses the presumption of validity applicable to claimed exemptions, and explains "[t]his presumption remains true in the context of lien avoidance under 11 U.S.C. § 522(f). Although the movant typically bears the burden of proving lien avoidance elements, where the grounds for an objection to lien avoidance rest upon a challenge to the debtor's claimed homestead exemption, Bankruptcy Rule 4003(c) shifts that burden to the [objector] to prove that the exemption is not properly claimed." (Citations and quotation marks omitted.) The opinion explains evidence is needed to defeat an exemption claim. And, the opinion highlights that, when a motion in the main case is decided along with a motion to dismiss an adversary proceeding, the court and the parties must be mindful of the legal standards and burdens associated with each motion.

Facts:

Debtors/Appellants Scott Warren Jencks and Linda Lee Jencks filed a chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Northern District of Iowa on July 14, 2021. Twelve days beforehand, Debtors purchased realty in New Hampton, Iowa, They didn't list this property in their bankruptcy schedules. Rather, they listed property in Waucoma, Iowa, as their residence, which consisted of three contiguous parcels. Debtors claimed the Waucoma property as fully exempt under Iowa’s homestead laws on their Schedule C. The Chapter 7 Trustee abandoned the estate's interest in Debtors' property after the first meeting of creditors, and no party objected to the exemption claim. While the case was pending, Debtors filed a Declaration of Homestead covering two of the three contiguous parcels--omitting a large vacant lot--and then sold the two parcels. The case subsequently closed after Debtors received their discharge in November 2021. In February 2023, Creditor/Appellee AgVantage FS, took action in Iowa state court to liquidate the vacant lot pursuant to a prepetition judgment lien. The sheriff conducted an auction in May 2023, which Creditor won. Prior to the sale, in March 2023, Debtors reopened their bankruptcy case and moved to avoid the judicial lien under 11 U.S.C. § 522(f) as impairing their homestead exemption. Debtors also filed an adversary proceeding against Creditor, seeking contempt sanctions for a violation of the discharge injunction. Ultimately, the bankruptcy court denied Debtors’ motion to avoid Creditor’s judicial lien, finding Debtors had abandoned the Waucoma property as their homestead when they purchased and started living in the New Hampton property (which property they had not disclosed in their schedules). The court also dismissed the adversary complaint, concluding Creditor held a valid lien and was entitled to enforce its in rem rights. Debtors moved to amend the judgment, noting the lack of evidence before the bankruptcy court on several matters crucial to its rulings. The bankruptcy court denied this motion and Debtors appealed.

Judge(s):

Hastings, Surratt-States, and Constantine

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