In re Boteler, Bankruptcy No. 80-00235
Decision Date | 05 August 1980 |
Docket Number | Bankruptcy No. 80-00235,Adv. No. 80-0176. |
Citation | 5 BR 408 |
Parties | In re James K. BOTELER, Jr., Brenda G. Boteler, Debtors. John P. DAY and Dorothy P. Day, Plaintiffs, v. James K. BOTELER, Jr. and Robert H. Ching, Jr., Trustee, Defendants. |
Court | U.S. Bankruptcy Court — Southern District of Alabama |
George W. Finkbohner, Jr., Howell, Johnston, Langford, Finkbohner & Lawler, Mobile, Ala., for John P. Day and Dorothy P. Day, plaintiffs.
Edward B. McDonough, Jr., Gallalee, Denniston, Cherniak & Moon, Mobile, Ala., for James K. Boteler, Jr., debtor-defendant.
Plaintiffs, John P. Day and Dorothy P. Day, have petitioned for relief from the automatic stay in order to proceed with the sale of the Debtors' residence to satisfy a judgment rendered in their favor against James K. Boteler, Jr., by the United States District Court, Mobile, Alabama, in Civil Action No. 78-420-H. Debtor filed a Motion to Dismiss the Plaintiffs' petition and also filed a pleading entitled Debtor's Avoidance of Judicial Lien. The Motion to Dismiss the Plaintiffs' petition was denied and the pleading entitled "Debtor's Avoidance of Judicial Lien" will be resolved by this decision.
The Debtor claims an exemption on his residential property pursuant to the provisions of Section 522(d)(1), Bankruptcy Code. Debtor argues that he should be allowed the Section 522(d)(1) exemption, and that he should also be allowed to avoid the plaintiffs' judicial lien pursuant to Section 522(f)(1), Bankruptcy Code, even though he has no equity in the residential property. His position is that no equity is necessary because he has an interest in the property which rests upon the importance of the "homestead exemption" and its allowing the Debtor to emerge from a Chapter 7 case with sufficient property to commence a fresh start.
The Plaintiffs contend that the allowance of the claimed exemptions would exceed the permissible scope of Section 522(d)(1), supra, because there is no equity and Section 522(f)(1), supra, is inapplicable because their judicial lien does not impair an exemptable interest to which the Debtor would have been entitled.
1. On November 4, 1974, Debtor's residence located at 7639 Adobe Ridge Road South, Mobile, Alabama, was mortgaged to Johnson-Rast-Hays Co. The mortgage was duly recorded. The balance due on the mortgage in favor of Johnson-Rast-Hays Co. is $30,751.86.
2. On July 18, 1979, a Judgment dated July 17, 1979, against James K. Boteler, Jr. (Debtor herein) and Jack W. Schoener was recorded in Probate Court, Mobile, Alabama. This judgment resulted in a judicial lien in the amount of $14,235.54 plus costs against all property of debtor subject to levy and execution pursuant to Title 6-9-211, Code of Alabama, 1972.
3. On August 16, 1979, a second mortgage on the above-described real property was duly recorded in favor of James Knox Boteler, Sr. The balance due on the mortgage in favor of James Knox Boteler, Sr. is $45,500.00.
4. Debtor filed a petition under Chapter 7, Bankruptcy Code, on March 21, 1980.
5. On June 6, 1980, an amendment to Debtor's original Schedule B-4 was filed claiming an exemptable interest in the above-described real property.
6. The current fair market value of the property at issue is $45,500.00.
A homestead exemption, like any other exemption claimed by a Chapter 7 debtor or debtors, must be carved out of the estate that is created upon the filing of the petition. Section 541, Bankruptcy Code, provides as follows:
There has been little judicial interpretation of this section. (See, e.g., Matter of Upright, 1 B.R. 694, N.D.N.Y. (1979) at p. 702 and Matter of Levy Ford, 3 B.R. 559, 6 BCD 202 (D.Md.1980)). However, the legislative history of Section 541 does provide guidelines as to its application.
Section 541 is therefore a departure from its predecessor Section 70a, Bankruptcy Act, under which title to all property of the debtor, wherever located, except exempt property, vested in the trustee as of the date of bankruptcy.
Hence, in spite of the breadth of Section 541, Congress has instructed not only that the right claimed must exist when bankruptcy is filed, but also that the right must be claimed via Section 522, Bankruptcy Code.
Section 522 is the statutory authority that enables the debtor to divest the trustee of certain property which falls under his supervision at the inception of the case:
The legislative history aids in interpreting the legislative enactment:
Thus while the debtor is given the right to an exemption, that right is not without limitation. Rights which did not exist as of the date of bankruptcy are not created by either Section 541 or Section 522. Section 541 takes every...
To continue reading
Request your trial