# U ni te d S ta te s B an kr up tc y A pp el la te P an el

For the Eig hth Circu it

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No. 1 3- 60 39

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In re: Mi rel la S. Gob en

ll ll ll ll ll ll ll ll ll ll l Deb to r

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Mi rel la S. Gob en

ll ll ll ll ll ll ll ll ll ll l Deb to r - Ap pe ll an t

v.

Co ry do n S ta te Ban k

ll ll ll ll ll ll ll ll ll ll l Obj ect or

- App el le e

__

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App eal fro m

Uni te d S ta te s B an kr up tc y Co ur t

fo r th e So ut he rn Dis tri ct of I owa - Des M oi ne s

__

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Su bm it te d: Aug us t 2 0, 2 01 3

Fil ed : Se pt em

be r 23 , 20 13

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Befo re KRESSEL, SCHERM ER an d NAIL, Ban kr up tc y Ju dg es

.

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SCHERM ER, Ban kr up tc y Ju dg eMi rel la S. Gob en (th e “ Deb to r”) ap pe al s fro m th e ba nk ru p t c y c ou rt’s or de r 1

su s t a i n i n g Co ry do n St at e Ban k’s (th e “ Ban k” ) ob jecti on to th e Deb to r’s cl ai m ed

ex em pt io n in a ve hi cl e, an d ru li ng th at th e Deb to r can no t av oi d th e Ban k’s li en un de r

§ 52 2( f) of Tit le 11 of th e Uni te d St at es Co d e (th e “ Ban kr up tc y Co de ”). W e ha ve 2

juri sd i ct io n ov er th is ap pe al fro m th e fin al or de r of th e ba nk ru pt cy co ur t. Se e 28

U.S.C. § 1 58 (b ). For th e rea so ns set for th be lo w, we affi rm

.

IS SUE

The fir st is su e in th is cas e is whe th er th e ba nk ru pt cy co ur t pr op erl y co nc lu de d

th at th e Deb to r ha d no in te res t in a ve hi cl e in whi ch sh e co ul d cl a i m a n ex em pt io n

whe re th e ve hi cl e was fu ll y en cu m be red

. W e ag ree wit h th e ba nk ru pt cy co ur t’s

de ci si on th at th e Deb to r co ul d no t cl a i m a n e xe m pt io n in th e Veh ic le

. The se co nd

is su e is whe th er Ban kr up tc y Co de § 52 2( f) al lo ws t h e D e b t o r to av oi d th e Ban k’s

li en

. W e al so ag r e e wit h th e ba nk ru pt cy co ur t’s ru li ng th at th e Ban kr up tc y Co de

pr ov id es for no su ch av oi da nc e.

BACKGRO UND

On Ja nu a r y 2

, 2 0 13

, th e Deb to r fil ed a vo lu nt ary pe ti ti on fo r rel ie f un de r

Ch ap te r 7 of th e Ban kr up tc y C o d e

. O n he r Sch ed ul e C (cl ai m ed ex em pt io ns ), th e

Deb to r cl ai m ed a $1 ,00 0 e x e mp t i o n in he r 20 00 Hy un da i Tib ur on (th e “ Veh ic le ”)

un de r Io wa la w. The Deb to r li st ed th e va l u e of th is ve hi cl e as $1 ,00 0 on he r

Sch ed ul e C.

T he H ono rab le Ani ta L. Sh od een, Ch ie f Judg e, U nit ed St at es Ba nkr upt cy 1

Co ur t fo r th e So ut he rn Dis tri ct of I owa

.

It is un cl e a r w he th er th e Deb to r ap pe al s th e § 52 2( f) po rti on of th e 2

ba nk ru pt cy co ur t’s de ci si on

. To gi ve t h e b e n e fit of th e do ub t to th e Deb to r, we

ad dr es s t he § 5 22 (f) ru li ng

.

2The Ban k ob jecte d to th e Deb to r’s cl ai m ed ex em pt io n in th e Veh ic le

, st at in g

th at it m ad e lo an s to th e Deb to r, an d cl ai m in g a pe rfec te d se cu rit y in t e r e s t i n th e

Veh ic le

. The Deb to r fil ed an Obj ec t i o n t o Ban k’s Obj ect io n to Exemp ti on (th e

“ Deb to r’s Object io n” ). Afte r a he ari ng

, th e ba nk ru pt cy co ur t he ld th at it was “ un cl ear

whe th er th e Ban k ho l d s a p erfe ct ed li en ag ai ns t [th e Veh ic le ]. ” The co ur t th en

or de red th e Ban k to pr ov id e do cu m en ts to sh ow th at it ha d a pe rfec te d li en ag ai ns t th e

Veh ic le

. Th e c o u r t s t at ed th at aft er rece ip t of th e req ue st ed do cu m en ts

, th e co ur t

wou ld m ak e a d eci si on wit ho ut a fu rth er h eari ng

. 3

In May 20 13

, th e ba nk ru pt cy co ur t en te red an or de r on it s do ck et fin di ng th at

th e Deb to r ha d li st ed th e Veh ic le on he r Sch ed ul e C wit h a va lu e of $ 1 ,00 0, an d as

ex em pt (u nd er I O W A C O D E § 6 27 .6) i n t he am ou nt of $ 1,0 00

. The co ur t st at ed th at

th e Ban k ob

jecte d to th e cl ai m ed ex em pt io n “ ba se d u po n two lo an s wit h an

ou ts ta nd in g ba la nc e of $4 ,23 3.3 9,” th at th e lo an s w e r e se cu red by th e Veh ic le an d

th at th e Ban k’s li en was no te d on th e Veh ic le ’s Cert ifi cat e of Tit le

. The co ur t

co nc lu de d th at th e de bt se cu red by th e Veh ic le ex ceed ed th e va lu e of th e Veh ic le an d,

th eref or e, “ th e Deb to r ha s no in te res t in th e m ot or [V]ehi cl e to cl ai m as ex em pt .” The

ba nk ru pt cy co ur t al so st at ed th at § 52 2( f) of th e Ban kr up tc y Co de “i s no t av ai la bl e

to th e Deb to r to av oi d t hi s type of li en .” The refo re, th e b an kr up tc y co ur t s us ta in ed

th e Ban k’s ob

jecti on to th e Deb to r’s ex em pt io n an d ov erru le d th e Deb to r’s

Object io n. 4

The Deb to r di d no t pro vi de us wit h a co py of th e he ari ng tra ns cri pt

, so

3

we do no t kn ow th e ex act arg um en ts th at were m ad e at th at he ari ng

. Howev er, t he

or de rs en te red by t he ba nk ru pt cy co ur t o n th e m eri ts of th is m at te r ru le on bo th th e

Deb to r’s cl ai m ed ex emp t i o n, an d on whe th er § 52 2( f) ap pl ie s to av oi d th e Ban k’s

li en s.

On J un e 1 2, 2 01 3, t he ba nk ru pt cy co ur t en te red an ord er i nc lu di ng th e 4

sa m e fin di ng s an d co nc lu si on s as th os e se t fo rth in th e May 20 13 or de r, an d al so

reco gn iz in g th at th e Deb to r was no t ab le to ti m el y ap pe al th e May 20 13 or de r be cau se

se rv ic e of it was no t m ad e on he r. The ba nk ru pt cy co ur t st at ed th at “ [t]he ti m e pe rio d

3STANDARD OF REVIEW

The ba nk ru pt cy co ur t’s fin di ng s of fac t a re rev ie wed fo r cl ear erro r, an d it

co nc lu si on s of l a w a r e r e v ie wed de no vo

. Abd ul -Rah im v. La Bar

ge (In re Abd

ul

Rah im ), 72 0 F .3d 71 0, 7 12 (8t h C ir. 2 01 3) (ci ta ti on om it te d)

.

DISCUSS IO N

“ The B a nk ru pt cy Co de al lo ws de bt or s to ex em pt cert ai n pr op ert y fro m th ei r

ba nk ru pt cy es ta t e s

, w h i c h are ot he rwis e co m pr is ed of al l th e de bt or ’s le ga l or

eq ui ta bl e i nt eres ts in pr op ert y .” Abd ul -Rah im

, 72 0 F.3 d at 71 2 (ci ti ng 11 U.S.C.

§§ 52 2( d) an d 54 1( a)). W e co ns tru e ex em pt io n st at ut es li be ral ly. Foe ll mi v. Ries (In

re Foel lmi

) , 47 3 B .R. 90 5, 9 08 n. 7 (B.A.P. 8t h C ir. 2 01 2) (ci ta ti on s o m it te d) ).

Gen eral l y, a de bt or m ay ex em pt pr op ert y th at is ex em

pt un de r § 52 2( d)

, or

un de r ap pl ic ab le st at e la w an d fed eral la w ot he r th an § 5 2 2 ( d )

. 1 1 U.S.C. §§ 52 2

(b )(1 ), (2 ) an d (3 ). A st at e m ay “ op t ou t” of th e Ban kr up tc y Co de ’s §5 22 (d )

ex em pt io ns , whi ch Iowa ha s d on e. 11 U.S.C. § 5 22 (b )(2 ); I O W A C O D E §6 27 .10

.

The Debt or

cla im ed an ex em

pt io n u nd er § 62 7.6 (9 ) of th e Io wa Co de , whi ch

pr ov id es th at “ [a] de bt or who is a res id en t of [Io wa] m ay ho ld ex em pt fro m ex ecu ti on

. . . [t]he de bt or ’s in te res t in on e m ot or ve hi cl e, no t to ex ceed in va lu e se ve n th ou sa nd

do ll ars .” I O W A C O D E § 6 27 .6(9 ).

The ba nk ru pt cy co ur t co rrec tl y de te rm in ed th at th e Deb to r is no t en ti tl ed to an

ex em pt io n un de r I O W A C O D E § 6 2 7

. 6 be cau se sh e do es no t ho ld an in te res t in th e

Veh ic le th at sh e co ul d cl ai m to be ex em pt

. To de te rm in e th e Deb to r’s in te res t in th e

Veh ic le th at is su bjec t to h er cl ai m of an ex em pt io n, we su bt ract th e am ou nt of th e

fo r ap pe al pu rs ua nt to Ban kr up tc y Ru le 80 02 (a) wil l be go ve rn e d b y t h e da te th is

Nun c Pro Tun c Ord er is fi le d o n t he do ck et .” The Deb to r ti m el y ap pe al ed th e Ju ne

20 13 or de r. The May 20 13 or de r is te ch ni cal ly re s ju di ca ta as to th e Ju ne 20 13 or de r.

4se cu red de bt fro m th e va lu e of th e Veh ic le

. The Deb to r do es no t di sp ut e th at th e

va lu e o f he r Veh ic le is le ss th an th e am ou nt sh e owe s to th e Ban k. The refo re, th e

Deb to r en joy s n o e qu it y , and ha s n o i nt eres t i n t he Vehi cl e to ex em pt

.

W e al so ag ree wit h th e ba nk ru pt cy co ur t’s st at em en t th at “ 11 U.S.C. [§ ] 52 2( f)

is no t av ai la bl e to Deb to r to av oi d th is type of li en .” Sect io n 52 2( f)(1 ) pr ov id es th at :

(1 )

. . . th e de bt or m ay av oi d th e fix in g of a li en on an i n t e r es t of th e

de bt or in pr op ert y to th e ex te nt th at su ch li en im pa irs a n e x e mpti on to

whi ch th e de bt or wou ld ha ve be en en ti tl ed un de r su bs ect io n (b ) of th is

se ct io n, i f su ch li en is

—

(A) a jud ic ia l l ie n . . . ;

(B) a no np os se ss or y , no n- pu rch as e m on ey sec ur it y in te res t i n a ny —

(i) h o u s e h o ld fu rn is hi ng s, ho us eh ol d go od s, weari ng ap pa rel

,

ap pl ia nc es

, bo ok s, ani m al s, crop s, m us ic al in st ru m en ts

, or jewelr y th at

are he ld pr im ari ly fo r th e pe rs on al

, f am il y

, or ho us eh ol d us e of th e

de bt or or a de pe nd en t o f th e d eb to r;

(ii ) im pl em en ts

, pr of

es si on al bo ok s, or to o l s

, o f t h e tra de of th e

de bt or or t he tra de of a de pe nd en t o f th e d eb to r; o r

(ii i) pr of es si on al ly pr es cri be d he al th ai ds fo r th e de bt or or a

de pe nd en t o f th e d eb to r.

11 U.S.C. § 52 2( f)(1 ). Not hi ng in th e reco rd su gg es ts

, ev en rem ot el y

, th at th e Ban k’s

in te res t i n t he Vehi cl e q ua li fie s u nd er an y cat eg or y en um erat ed in § 5 22 (f)(1 ).

CONCLUSI ON

Fo r t h e reas on s se t fo rth ab ov e, th e de ci si on of th e ba nk ru pt cy co ur t is

AFFIR MED.

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