Voelker, Matter of

• Decision Date: 12 December 1994
• Docket Number: No. 94-2271,94-2271
• Citation: 42 F.3d 1050
• Parties: -7438, 63 USLW 2398, 95-1 USTC P 50,028, 32 Collier Bankr.Cas.2d 873 In the Matter of Mitchell W. VOELKER, Debtor-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1050

42 F.3d 1050

74 A.F.T.R.2d 94-7438, 63 USLW 2398,

95-1 USTC P 50,028,

32 Collier Bankr.Cas.2d 873

In the Matter of Mitchell W. VOELKER, Debtor-Appellant.

No. 94-2271.

United States Court of Appeals Seventh Circuit.

Argued Nov. 9, 1994.

Decided Dec. 12, 1994.

Gary R. Allen, Bruce R. Ellisen, William S. Estabrook, Alice L. Ronk (argued), Dept. of Justice, Tax Div., Appellate Section, Washington, DC, for appellee.

Terrence J. Byrne, George Goyke (argued), Wausau, WI, for debtor-appellant.

Before CUMMINGS, FLAUM, and ROVNER, Circuit Judges.

FLAUM, Circuit Judge.

The debtor, Mitchell Voelker, appealed from a decision of the District Court holding that the Internal Revenue Service's ("IRS") tax lien extended to his personal property exempt from levy under 26 U.S.C. Sec. 6331. We affirm.

I.

Mitchell Voelker filed a voluntary Chapter 13 bankruptcy petition on July 29, 1992. On November 19, 1992, the IRS filed a proof of a secured claim for delinquent taxes in the amount of $27,736, covering the years 1984 through 1989. Voelker objected to this claim, contending that the IRS had a secured claim only in the amount of $2,471, the value of his unencumbered assets less $825.00 worth of personal property, including clothing, hand tools, a lawnmower, a weedeater, and a bow and arrows, which were exempt from levy under 26 U.S.C. Sec. 6331. Voelker argued that because this property was exempt from levy, it was likewise exempt from the federal tax lien. The IRS objected, claiming that under 26 U.S.C. Sec. 6321 it had a lien on all of Voelker's property. Voelker then amended his Chapter 13 plan to provide that he would surrender the property at issue to the IRS if a court determined that the lien extended to the property.

The bankruptcy court held that the IRS's lien did not attach to Voelker's exempt property. In Re Voelker, 164 B.R. 308 (Bkrtcy.W.D.Wis.1993). It noted that "[p]ersonal property exemption statutes should be liberally construed in order to carry out the legislature's purpose in enacting them--to protect debtors." Id. at 312 (citations omitted). It reasoned that Sec. 6331's definition of levy as including "the power of distraint and seizure by any means" precluded the lien from attaching to the exempt property. Id.

The district court, however, reversed the bankruptcy court's decision. In an unpublished opinion, the district court found that the plain language of Sec. 6321 led to the conclusion that the federal tax lien did attach to property exempt from levy.

II.

We review questions of law de novo. Matter of West, 22 F.3d 775, 777 (7th Cir.1994). When interpreting a statute, "[i]f the statute is unambiguous, we must enforce the plain meaning of the language enacted by Congress." Family & Children's Center, Inc. v. School City of Mishawaka, 13 F.3d 1052, 1060 (7th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 420, 130 L.Ed.2d 335 (1994). This court "will look beyond the express language of a statute only where that statutory language is ambiguous or where a literal interpretation would lead to an absurd result or thwart the purpose of the overall statutory scheme." United States v. Real Estate Known as 916 Douglas Ave., 903 F.2d 490, 492 (7th Cir.1990), cert. denied sub nom. Born v. United States, 498 U.S. 1126, 111 S.Ct. 1090, 112 L.Ed.2d 1194 (1991).

Section 6321 states:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that many accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

26 U.S.C. Sec. 6321 (emphasis added). The Supreme Court has noted that this language "is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have." United States v. National Bank of Commerce, 472 U.S. 713, 719-20, 105 S.Ct. 2919, 2924, 86 L.Ed.2d 565 (1985). "Stronger language could hardly have been selected to reveal a purpose to assure the collection of taxes." Glass City Bank v. United States, 326 U.S. 265, 267, 66 S.Ct. 108, 110, 90 L.Ed. 56 (1945). The language of the statute unambiguously shows that the federal tax lien attaches to all of a debtor's property, without exception. Thus, we agree with the district court, and the majority of other courts addressing the issue, that the lien attached to Voelker's $825.00 worth of personal property. ¹ See, e.g., United States v. Barbier, 896 F.2d 377 (9th Cir.1990); Matter of King, 137 B.R. 43, 46 (D.Neb.1991); United States v. Stowe, 121 B.R. 549, 552-53 (N.D.Ind.1990); In Re Schreiber, 163 B.R. 327, 334 (Bkrtcy.N.D.Ill.1994); In Re Lyons, 148 B.R. 88, 92 (Bkrtcy.D.D.C.1992); In Re Krahn, 124 B.R. 78, 82 (Bkrtcy.D.Minn.1990); In Re Hall, 118 B.R. 671, 672 (Bkrtcy.S.D.Ind.1990); Matter of Beard, 112 B.R. 951, 953-54 (Bkrtcy.N.D.Ind.1990); In Re Bates, 81 B.R. 63, 64 (Bkrcty.D.Ore.1987); In Re Ridgley, 81 B.R. 65, 69 (Bkrtcy.D.Ore.1987); In Re Jackson, 80 B.R. 213, 214-15 (Bkrtcy.D.Colo.1987). ²

Contrary to Voelker's assertions, 26 U.S.C. Sec. 6331 does not alter this result. That section provides:

(a) Authority of Secretary--If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax.

(b) The term "levy" as used in this title includes the power of distraint and seizure by any means. ³

Section 6331 says nothing about protecting this property from a lien, but merely from levy. Congress exempted this property from levy and has the capacity to do the same with the tax lien. It has chosen not to do so.

This dissimilarity in treatment makes sense, for as the Ninth Circuit discussed in Barbier, a lien and levy are different things. "A levy forces debtors to relinquish their property. It operates as a seizure by the IRS to collect delinquent income taxes." 896 F.2d at 379. On the other hand, "a lien ... is merely a security interest and does not involve the immediate seizure of property. A lien enables the taxpayer to maintain possession of protected property while allowing the government to preserve its claim should the status of [the] property later change." Id. Thus, if a debtor later sells the exempt property, the IRS could move to collect the proceeds from the sale.

Having the IRS lien attach to exempt property does not, as Voelker contends, undermine Sec. 6334's goal of allowing the debtor to "retain some minimal personal effects necessary for living in our society," because the IRS cannot summarily seize the property. The debtor retains possession and the lien simply determines the amount he has to pay the IRS. ⁴ Thus, the effect of our holding that the IRS's lien attaches to Voelker's personal property will require him to pay the IRS $825.00 more than if the lien did not attach, either through larger monthly payments or through payments over a longer time period. As noted previously, however, Voelker has amended his plan to provide for the surrender of this property to the IRS, should we hold, as we do today, that the lien attaches. This action is not necessary, see 11 U.S.C. Sec. 1325(a)(5), and does not alter our conclusion.

Extending the IRS's lien to property exempt from levy accomplishes both of Congress's goals: it increases the payment of delinquent taxes and allows the debtor to protect his property from summary, non-judicial seizure. Because it is not absurd that Congress would extend the lien to personal property yet preclude the levy of that property, we will not manufacture a different understanding of the "all property and rights in property" language in Sec. 6321 and the exemption from levy in Sec. 6331.

For the foregoing reasons, the decision of the district court is affirmed and the case remanded for further action.

AFFIRMED.

ROVNER, Circuit Judge, concurring.

The court's opinion today is a succinct and true application of the law and in that respect I join it without hesitation. This case has led me to question whether the law makes much sense, however. The problem is one for Congress to fix, of course, and my view of the practicalities may matter little. Some cases nonetheless cry out for comment, and I believe this is one of them.

Central to the framework of personal bankruptcy is the notion of a "fresh start": the opportunity for a debtor to pool his resources, pay what he can of his debts, and move on. See, e.g., In re Smith, 848 F.2d 813, 816-17 (7th Cir.1988); In re LeMaire, 898 F.2d 1346, 1357-58 n. 16 (8th Cir.1990) (en banc) (dissenting op.). But a fresh start ought not be a naked start. A debtor should not be made to surrender the clothes on his back or the food in his cupboard in exchange for the protection of bankruptcy. Common sense as well as compassion dictates as much: a bankrupt deprived of life's necessities will merely have to reallocate a portion of his future income to reacquire those items (in all likelihood at a greater cost), defeating the purpose of the fresh start bankruptcy purports to provide. It makes far more sense to leave these items in the debtor's hands. Consistent with that notion, section 6334(a) exempts a category of personal property from the power of administrative levy that the IRS otherwise enjoys.

But, as the IRS is quick to point out, the statute says nothing about a lien. And because the statutory exemption indeed refers only to levies, and the levy and the lien are distinct legal concepts, the court correctly concludes that the exemption does not deprive the IRS of the lien that it enjoys on all property owned by the debtor.

Permitting the IRS to...