In re Montemurro, Bankruptcy No. 881-82844-20.

• Decision Date: 10 January 1984
• Docket Number: Bankruptcy No. 881-82844-20.
• Citation: 66 BR 124
• Parties: In re Vincent G. and Sarah MONTEMURRO, Debtors.
• Court: U.S. Bankruptcy Court — Eastern District of New York

66 B.R. 124 (1984)

In re Vincent G. and Sarah MONTEMURRO, Debtors.

Bankruptcy No. 881-82844-20.

United States Bankruptcy Court, E.D. New York, at Westbury.

January 10, 1984.

Pincus & Solomon, by Albert R. Pincus, Levittown, N.Y., for debtors.

Milton Costroff, New York City, for Bankers Trust New York Corp.; David E. Pressman, of counsel.

ROBERT JOHN HALL, Bankruptcy Judge.

On July 20, 1983 this Court signed an Order reopening the debtors' chapter 7 case to allow them to file an action to avoid a judicial lien. The debtors' case had been closed on January 8, 1982. The debtors filed a motion on October 13, 1983 seeking an order voiding the judicial lien of Bankers Trust New York Corporation pursuant to 11 U.S.C. § 522(f). The lien in question arose from a judgment attained by Bankers Trust on December 10, 1980 for $1,843.48.

The debtors sold their real property for $58,500.00 on July 30, 1983. In order to close title to the property, it was necessary for the debtors to post a $2,000 escrow with the company insuring title. The debtors now seek to avoid the lien as the prerequisite for return of the escrow funds.

Bankers Trust sets forth two arguments why the debtors should not be permitted to avoid its lien at this time. The first is that the debtors no longer own the property subject to its lien. Bankers Trust argues that the Court lacks power to avoid a judicial lien on property not owned by the debtors. Bankers Trust points to the language of section 522(f) that "the debtor may avoid the fixing of a lien on an interest of the debtor in property. . . ." The second argument of Bankers Trust is that it would be unfairly prejudiced if the Court were to require a valuation hearing now in order to determine what the value of the property was two years ago.

The issue of whether section 522(f) should be construed as to permit debtors to avoid a lien on property that they no longer own, but that they owned during pendency of the case, is a difficult one. Certainly the literal language of section 522(f) supports the creditor's position. Nowhere in the legislative history of the Bankruptcy Code is this issue addressed. An analysis of the purpose of section 522(f) only yields the vague policy of furthering the debtor's "fresh start." In the absence of a compelling reason not to construe the section's language literally, the Court is constrained to deny the debtors' motion on this basis alone.

The second basis upon which the Court must deny the debtors' motion is that of laches. If the Court were to permit the debtors to invoke section 522(f) at this point, the Court would need to hold a valuation hearing. At such a hearing, in order for the debtors to demonstrate that the lien imparied their exemption, they would have to establish that at the time of filing (August 24, 1981), their home was worth $41,400.00 or less.¹ If the creditor could establish...