Court Opinion

ID: 9487614
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:21:54.333796+00
Date Added: 2024-06-11T17:52:23.263153
License: Public Domain

ROVNER, Circuit Judge,
concurring.
The court’s opinion today is a succinct and true application of the law and in that respect I join it without hesitation. This ease has led me to question whether the law makes much sense, however. The problem is one for Congress to fix, of course, and my view of the practicalities may matter little. Some cases nonetheless cry out for comment, and I believe this is one of them.
Central to the framework of personal bankruptcy is the notion of a “fresh start”: the opportunity for a debtor to pool his resources, pay what he can of his debts, and move on. See, e.g., In re Smith, 848 F.2d 813, 816-17 (7th Cir.1988); In re LeMaire, 898 F.2d 1346, 1357-58 n. 16 (8th Cir.1990) (en banc) (dissenting op.). But a fresh start ought not be a naked start. A debtor should not be made to surrender the clothes on his back or the food in his cupboard in exchange for the protection of bankruptcy. Common sense as well as compassion dictates as much: a bankrupt deprived of life’s necessities will merely have to reallocate a portion of his future income to reacquire those items (in all likelihood at a greater cost), defeating the purpose of the fresh start bankruptcy purports to provide. It makes far more sense to leave these items in the debtor’s hands. Consistent with that notion, section 6334(a) exempts a category of personal property from the power of administrative levy that the IRS otherwise enjoys.
But, as the IRS is quick to point out, the statute says nothing about a lien. . And because the statutory exemption indeed refers only to levies, and the levy and the lien are distinct legal concepts, the court correctly concludes that the exemption does not deprive the IRS of the lien that it enjoys on all property owned by the debtor.
Permitting the IRS to retain a hen on personal property may make some sense given the possibility that a debtor could decide to sell it. If Mr. Voelker decides to give up his weed eater or his bow and arrows, it only seems fair that the IRS lay claim to the cash he gains from the sale. And yet it would seem unrealistic to expect that the government will realize substantial remuneration from the sale of these second-hand items. Notably, for example, the statute currently imposes a cap of $1,650 on the value of “fuel, provisions, furniture, and personal effects” which may be exempted from levy. § 6334(a)(2). Moreover, many of these and other items falling within the exemption can hardly be considered luxuries that a person can do without — e.g., food, clothing, fuel, and school books. § 6334(a)(1), (2). Thus, the likelihood that the debtor will (short of desperation) convert these modest belongings to cash appears low, and the prospect that the proceeds will be significant if he does even lower. Perhaps there is a forgotten Armani original hanging in Mr. Voelker’s closet, but I doubt it.
Of far more concrete benefit to the IRS in recognizing a hen on such property is the fact that the value of the property must be included in the total amount the debtor is obligated to repay the government. Ante at 1052 & n. 4. Thus, in the event that the debtor “chooses” to keep the property (and what real “choice” is there with respect to items like food, clothing, and fuel?), he must either make higher monthly payments over the life of his payment plan or make these payments over a longer period of time, beyond the usual three-year maximum if need be. See 11 U.S.C. § 1322; ante n. 4. Neither of these scenarios is consistent with the purpose of bankruptcy. A higher monthly payment raises the probability that the debt- or will default on his obligations, particularly when he has a limited income. The latter option postpones the fresh start that the debtor has sought to achieve in filing for bankruptcy protection.
What will happen if Mr. Voelker elects to keep his personal property but cannot make *1054good on the increased financial obligation that decision would impose on him? The government reassured us at oral argument that it does not want Mr. Voelker’s clothing. I take that to mean that although the IRS enjoys a lien on the $825 worth of personal property Mr. Voelker possesses, it would never go so far as to seek to enforce that lien in foreclosure proceedings. Thus, Mr. Voelker need not worry about having the clothes taken from his back, literally. Yet, he ought not have to rely on a wink and a nod in assessing his prospects, either. We assume that debtors, like any other citizens, will take their financial obligations seriously. So if Mr. Voelker wishes to keep his personal effects, he will no doubt do his best to scrape among meager resources to pay for them. Again, this seems to me to be contrary to the purpose of bankruptcy protection. If the government either will not or cannot enforce the hen on Mr. Voelker’s personal property, then arguably it should never be recognized in the first instance.
Mr. Voelker’s amended Chapter 13 plan provides that in the event the hen on his personal property is upheld, he will surrender these goods to the government in heu of increased payment obhgations. No one disputes that this is his right, and by putting the government in the business of conducting a rummage sale Mr. Voelker may be doing the one thing that best exposes the folly in permitting the IRS a hen on this category of property. Surely the cost of liquidating these items (if the government even tries) far outmeasures any income that the IRS can hope to attain from their sale. To say nothing of the cost to Mr. Voelker’s dignity and, in the final analysis, our own.