Court Opinion

ID: 9704083
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:21:12.969692+00
Date Added: 2024-06-11T15:15:17.626102
License: Public Domain

De JESUS, Bankruptcy Judge,
dissenting.
The facts are accurately portrayed by the majority opinion and do not need to be repeated here. I respectfully disagree with my colleagues’ opinion to partially reverse the Bankruptcy Court’s decision. I would affirm Judge Hillman’s ruling for the following reasons.
First, the opinion does not attempt to determine “... the value of Debtor’s interest in the property ...” required by 11 U.S.C. § 522(f)(2)(A). The opinion assumes the value of Debtor’s interest is $225,000.00. This may not be the case given the fourth footnote of the majority opinion and the ruling entered in In re Cozad, 208 B.R. 495 (10th Cir. BAP 1997).
My second reason for disagreeing with the majority is articulated by Bankruptcy Judge James D. Walker, Jr. in In re Thomsen, 181 B.R. 1013 (Bankr.M.D.Ga.1995). I cannot improve on what he states. I, therefore, transcribe it and adopt it as my own. *785of exemption, section 522 appears to reduce the judicial lien to the value of the property leaving the judicial lien intact alongside the debtor’s exemption claim. In such a case, both the debtor and creditor would have to share future appreciation in some way.
*784There are three factual patterns that have been troublesome to the courts. The first is where the value of the property does not exceed the consensual liens. The second is where the value is more than the consensual liens but not more than the consensual liens plus the debtor’s exemption claim. The third is where the value exceeds the consensual lien plus debtor’s exemption claim. The Ward case is based on the first pattern, as is the [In re] Chabot [992 F.2d 891 (9th Cir. 1993)] case. The Hunter case is based on the second pattern. The Court is unable to discern which fact pattern the [In re] Wrenn [40 F.3d 1162 (11th Cir. 1994)] case is based on because of the lack of any finding as to fair market value.
The formulas used by Congress and the Brantz court differ in form. Both formulas call for partial avoidance of a lien in some cases using the fair market value of the property as a bench mark. The goal of each formula is to determine the existence of equity in property above consensual liens plus exemptions, and avoid a judicial lien if no such equity exists. A debtor’s ability to enjoy the future appreciation of property is endorsed by the legislative history of section 522(f)(2)(A) if all equity in the property is consumed by consensual liens and claims of exemption. A judicial lien will not be avoided if equity remains above the consensual liens plus claims of exemption, but rather will be subject to some kind of partial avoidance.
The new section 522 now seems to serve a dual function. The lien avoidance provisions of section 522(f)(2)(A) are similar to the lien stripping provisions of section 506. This is because Congress has chosen to include in the definition of impairment the interference with the enjoyment of future appreciation in property. Exemptions are considered to include both the present cash value as well as the right to enjoy future appreciation. Where equity exists above the consensual liens plus the claims
*785The problem with this approach is that the result is unrealistic. A lien is an absolute entitlement. Property is either subject to a lien, or not. What matters is the amount of the debt that can be asserted against the property through the lien. Under section 506, the bifurcation of a claim results in a division of the claim amount between the portion secured by the lien, and the portion that is unsecured. The concept of bifurcation of the lien, rather than the debt which it secures, is heretofore unknown. It appears that this fact is what has led courts to conclude that the appropriate analysis under the former 522(f) is to think in terms of “carving out” the exemption rather than reducing the lien.
The provisions of section 522(f) only provide for avoiding the lien, not reducing the lien. There is no provision for reducing the claims secured by the lien. The concept of avoidance as an effect that can be limited “to the extent” of impairment has now been reduced to a numeric calculation. Still, there is no way to reflect the distinction in the result where impairment occurs to a greater extent or to a lesser extent unless the claim secured by the lien is reduced.
The “carve out” approach does not seem to be favored by the amendment since it denies the debtor the ability to enjoy future appreciation. The new section seems to try to protect this possibility for the debtor even where partial avoidance seems mandated.
Thus, although the amendment has resolved the Ward and Hunter dilemma clearly, a problem remains in the third fact pattern where impairment is only partial.
Aside from the “carve out” analysis, or the claims bifurcation process of section 506, the only remaining option is to conclude that the result of a partial impairment is the same as total impairment, that being complete lien avoidance. Even that result is impractical because it could easily be avoided by the creditor’s voluntary reduction in the amount of the claim secured by the lien. This kind of claims gamesmanship is surely not what this amendment was intended to invite.
Thomsen, 181 B.R. at 1016-17 n. 2 (emphasis added).