In re Senior
| Decision Date | 23 January 2013 |
| Docket Number | CASE NO. 09-35527 HCD |
| Parties | IN THE MATTER OF MARK ELMO SENIOR and EVA CELESTE SENIOR, DEBTORS. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
Appearances:
Loraine P. Troyer, Esq., counsel for debtors, 121 North Third Street, Goshen, Indiana 46526; and
Bradford R. Shively, Esq., counsel for creditor Nate Roll, Sanders Pianowski, LLP, 300 Riverwalk Drive, Elkhart, Indiana 46516.
DECISION and ORDER
At South Bend, Indiana, on January 23, 2013.
Before the court are the Motion to Avoid Lien Pursuant to 11 U.S.C. § 522(f), filed by the debtors Mark Elmo Senior and Eva Celeste Senior ("debtors"), by counsel, and the Objection to Debtors' Motion, filed by creditor Nate Roll ("creditor"), by counsel.1 See R. 133, 142. After the parties filed a Response and Reply, the court took the matter under advisement. See R. 167. For the reasons that follow, the court denies the debtors' Motion to Avoid Lien and sustains the creditor's Objection.2
These facts are not in dispute. The debtors owned real estate on Mark Drive in Bristol, Indiana. The creditor held a judicial lien on that residential property pursuant to a judgment entered in his favor on April 11, 2008, in the Elkhart Superior Court, in the amount of $59,232.87 plus interest. The debtors filed their chapter 13 petition on November 20, 2009. On Schedule A they listed the residential real estate at issueand stated its current value as $250,000.00. On Schedule C they claimed an exemption of $30,000.00 in the real estate and again listed the fair market value of that property as $250,000.00. See Ind. Code § 34-55-10-2(c)(1) (). On Schedule D, amended on December 17, 2009, the debtors listed the liens as follows:
R. 14. In the debtors' Motion to Avoid Lien, the lien amounts were listed as follows:
R. 133 at 2. Those liens, in total, amount to $91,694.77. The creditor agrees with that figure. See R. 142 at 6. The court therefore finds that the cumulative total of the liens against the debtors' residential property is $91,694.77.
In their Motion to Avoid Lien, the debtors alleged that the value of the real estate was $118,000.00, rather than $250,000.00, on the ground that, when the Trustee listed the real estate for sale, the highest and best offer received for it was $118,000.00.3 Using those figures, the debtors argued that the creditor's lien was partially avoidable pursuant to 11 U.S.C. § 522(f) and specifically that the lien should be avoided in the amount over and above $54,283.60. See R. 133 at 2. The creditor objected, asserting that the value of the property sought to be exempted was to be determined by its value on the date of the debtors' bankruptcy petition. See R. 142 at 5. Because the debtors declared that valuation to be $250,000.00, he argued, the debtors' exemption was not impaired and they were not entitled to avoid the creditor's judgment lien. See id. at 8.
DISCUSSION
Section 522(f) of the Bankruptcy Code permits the avoidance of judicial liens. It provides that "the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled . . . if such lien is . . . a judicial lien." 11 U.S.C. § 522(f)(1)(A). The statute provides the means for calculating the impairment:
11 U.S.C. § 522(f)(2)(A). The statute also defines "value" to mean "fair market value as of the date of the filing of the petition" in § 522(a)(2). The debtors, as the movants seeking to avoid the judicial lien, have the burden of proving, by a preponderance of the evidence, each element of the § 522(f) lien avoidance calculation. See Schoonover v. Karr, 285 B.R. 695, 700 (S.D. Ill. 2002); In re Kelly, 350 B.R. 778, 787 (Bankr. N.D. Ill. 2006).
The Seventh Circuit has stated clearly that "the date of valuation of an asset for purposes of determining whether it can be exempted is the date on which the petition for bankruptcy is filed; it is not a later date on which the asset may be worth a lot more." In re Polis, 217 F.3d 899, 902 (7th Cir. 2000); see also In re Willett, 544 F.3d 787, 791 (7th Cir. 2008); In re Patterson, 825 F.2d 1140, 1144 (7th Cir. 1987). Accordingly, the parties are required to apply § 522(f) using the petition date as the operative date for determining the value of the debtors' residence.
There is no challenge to the debtors' assertion that they hold an interest in the residential property and a valid Indiana statutory homestead exemption in it, or to creditor's claim that he holds a valid judiciallien under Indiana law on that property. The issue is whether the creditor's lien impairs the debtors' exemption and therefore is avoidable.
It is clear from the statute and the case law that the value of the debtors' interest in the property is determined on the petition date, November 20, 2009, and not on the later sale date, when the property was worth much less. The debtors listed the fair market value of the property on their bankruptcy schedules at $250,000.00. In addition, the Schultz Appraisal Services, Inc., completed an Appraisal Report on June 7, 2012, which also reported that the market value of the real estate on November 20, 2009, was $250,000.00. See R. 142, Ex. A.
To determine whether the creditor's judicial lien impairs these debtors' exemption, the court turns to the arithmetic calculation of § 522(f)(2) and follows its mathematical requirements: "[A]dd (i) the lien the debtor seeks to avoid, (ii) all other liens, and (iii) the exemption amount in the absence of all other liens, and subtract the value of the debtor's interest in the property in the absence of all liens." In re Kelly, 350 B.R. at 787. In this case, the following figures were presented by the debtors, who had the burden of proving that the creditor's lien could be avoided:
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