In re Allen
| Decision Date | 20 January 1998 |
| Docket Number | Bankruptcy No. 96-0565-3P7. |
| Parties | In re Dudley D. ALLEN, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Raymond R. Magley, Smith, Hulsey & Busey, Jacksonville, FL, for Plaintiff.
Richard T. Thames, Stutsman & Thames, Jacksonville, FL, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case is before the Court upon the objection of Hanley C. Clark, Receiver for George Washington Life Insurance Company, to the debtor's Motion to Avoid Lien. Upon the evidence presented at the hearing on the objection on September 16, 1997, the Court enters the following findings of fact and conclusions of law:
FINDINGS OF FACT
1. On July 7, 1995, Hanley C. Clark, Receiver for George Washington Life Insurance Company (Receiver), obtained a judgment against Dudley D. Allen (Debtor) in the United States District Court for the Southern District of West Virginia in the amount of $6,198,591.34. (Debtor Ex. 1.)
2. The West Virginia District Court's judgment was registered in the United States District Court for the Middle District of Florida on September 26, 1995. (Debtor Ex. 10.)
3. On November 17, 1995, the Receiver moved the West Virginia District Court for an order directing the debtor to convert a Mass Mutual Variable IRA and a Merrill Lynch IRA to cash, and to deliver the cash to the Receiver. (Receiver Ex. 3.)
4. The motion was granted on January 11, 1996, and the debtor was ordered to convert the IRAs and surrender the proceeds to the Receiver (Turnover Order). (Receiver Ex. 5.) A copy of the Turnover Order was subsequently recorded in Duval County, Florida, on January 18, 1996. (Debtor Ex. 8.)
5. Debtor filed for relief under Chapter 7 of the Bankruptcy Code on February 1, 1996.
6. In his schedules, Debtor claimed various property, including the Mass Mutual and Merrill Lynch IRAs, as exempt. (Debtor Ex. 2.)
7. On March 21, 1996, George Washington Life Insurance Company in Liquidation filed an objection to the debtor's claim of exemptions. (Debtor Ex. 4.)
8. In an order dated December 18, 1996, this Court overruled the objection to Debtor's exemptions, with one exception.1 (Debtor Ex. 5.) The following exemptions were allowed by the Court:
9. On July 9, 1997, this Court denied the debtor's discharge pursuant to 11 U.S.C. § 727(a)(2)(A) on the grounds that he transferred property within one year of the petition date with the intent to hinder, delay or defraud a creditor. (Receiver Ex. 7.)
10. The Receiver then demanded, in a letter to the debtor's attorney dated July 21, 1997, that the debtor surrender the Mass Mutual and Merrill Lynch IRAs pursuant to the terms of the Turnover Order. (Debtor's Ex. 9.)
11. On July 24, 1997, the debtor filed a motion to avoid the judicial lien imposed by the West Virginia District Court against the debtor's exempt property. (Doc. 61.)
12. The Receiver filed an objection to the debtor's motion on August 13, 1997. (Doc. 63.)
Upon the filing of a petition in bankruptcy, a bankruptcy estate comprised of the debtor's legal and equitable interests in property is created. 11 U.S.C. § 541 (1997). Pursuant to 11 U.S.C. § 522(b), debtors are allowed federal exemptions which in effect shield certain property from creditor claims. However, states are granted the opportunity to opt out of the federal exemption scheme at their election. 11 U.S.C. § 522(b)(1) (1997). Florida has elected to opt out of the federal scheme and now provides exemptions to debtors according to state law. Fla.Stat.Ann. § 222.20 (West 1998).
Debtors are given the opportunity to avoid liens on exempt property by 11 U.S.C. § 522(f). Pursuant to § 522(f)(1) a debtor may:
11 U.S.C. § 522(f)(1) (1997). The lien avoidance statute thus allows a debtor to avoid: 1. The fixing of a judicial lien; 2. on an interest of the debtor in property; 3. if that lien impairs the debtor's exemption(s). Id.
In his Motion to Avoid Lien, the debtor seeks to avoid the judicial lien of the Receiver by utilizing § 522(f). The Receiver objects to avoidance of the lien, and contends that a debtor whose discharge is denied under 11 U.S.C. § 727(a)(2)(A) cannot avoid liens under § 522(f) because the debtor does not obtain the fresh start which § 522(f) was intended to protect. To the contrary, the debtor asserts that his failure to obtain a discharge is irrelevant for purposes of § 522(f). Therefore, prior to determining whether the debtor has met the requirements of subsection (f), the Court must first determine whether 11 U.S.C. § 522(f) is an available remedy for a debtor whose discharge has been denied.
This issue is an issue of first impression in this Court. Those courts which have addressed the issue have held that a debtor is entitled to avoid a judicial lien pursuant to § 522(1) even if his discharge has been denied. In re Henderson, 155 B.R. 157 (Bankr. W.D.Tex.1992), rev'd on other grounds, 168 B.R. 151 (Bankr.W.D.Tex.1993), aff'd, 18 F.3d 1305 (5th Cir.1994), cert. denied, 513 U.S. 1014, 115 S.Ct. 573, 130 L.Ed.2d 490 (1994); In re Pipes, 78 B.R. 981 (Bankr. W.D.Mo.1987). Similarly, numerous courts have held that judicial liens may be avoided even though the debt underlying the lien may be excepted from the...
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In re Clark
... ... FINDINGS OF FACT ... 1. On July 7, 1995, Hanley C. Clark, Receiver for George Washington Life Insurance Company (Receiver), obtained a judgment against Dudley D. Allen, John H. Wilbur, and Frank E. Clark, Jr. (Debtor) in the United States District Court for the Southern District of West Virginia in the amount of $6,198,591.34. (Receiver Ex. 2.) Debtor is jointly and severally liable for $2,107,521.34 of this amount ... 2. On November 17, 1995, ... ...