United States District Court, D. Nebraska
MEMORANDUM AND ORDER
WARREN K. URBOM, Senior District Judge.
Brittany Dee Isley, debtor, appeals an order of the United States Bankruptcy Court which denied a motion to avoid a lien filed by the debtor. See In re: Isley, No. BK 13-40184. The debtor has elected to have the appeal heard by this court. (ECF No. 1.) For the following reasons, I shall reverse the bankruptcy court's decision.
Isley filed a voluntary petition for Chapter 7 relief in the bankruptcy court on February 1, 2013. (Doc. 1). She is a single mother with three minor children. (Doc. 1, Schedule I). At the time of the filing, she was working as a claims associate at Dell, where she had been employed for two months. (Id.). She earned $2, 080 per month, received no child support, and received $501 per month in food stamps. (Doc. 1, Schedule J). At the time of the filing, her wages were being garnished by a creditor, and she still owed $1, 176.83 to that creditor. (Doc. 1, Statement of Financial Affairs).
As an asset, Isley listed a 1998 Chevrolet Suburban with a dent in the side and 200, 000 miles, which she valued at $2, 300. (Doc. 1, Schedule B). On Schedule C, Isley indicated that the vehicle is exempt under Neb. Rev. Stat. § 25-1556(4). (Doc. 1, Schedule C). She identified the vehicle loan as a "non-Purchase Money Security, " with the amount owed of $3, 133.76, of which $833.76 was unsecured. (Doc. 1, Schedule D). Isley sought to retain the vehicle and to avoid the lien using 11 U.S.C. § 522(f). (Doc. 1, p. 40). The creditor for the vehicle is Mid American Title Loan. (Doc. 1, Schedule D). Isley used the vehicle to travel to and from her job.
The first meeting of creditors was held on April 1, 2013. On April 8, the trustee filed its intent to claim certain assets and abandon certain assets. (Doc. 17). The trustee claimed the non-exempt portion of an income tax refund and abandoned all other scheduled assets on the grounds that those assets are either exempt, secured in excess of their value, or burdensome to administer. (Id.).
On September 9, 2013, Isley filed a motion to avoid the lien of Mid American Title Loan. (Doc. 28). She alleged that her interest in the vehicle did not exceed the personal property exemptions allowed to a debtor by Neb. Rev. Stat. § 25-1556(4). (Id.). Isley also alleged that the existence of the lien impaired an exemption to which she would otherwise be entitled under Neb. Rev. Stat. § 25-1556(4) and § 25-1552 because the fair market value of the vehicle was $2, 300 and the amount of her obligation to the creditor was approximately $325.83. (Id.). Neither the creditor nor the trustee filed a resistance, objection, or response to Isley's motion.
On October 1, 2013, the bankruptcy court entered an order denying Isley's motion to avoid the lien. (Doc. 29). The court entered only a text order referring to its order of September 12, 2013, in In re Cardwell, No. 13-40623. (Id.).
II. STANDARD OF REVIEW
"When a bankruptcy court's judgment is appealed to the district court, the district court acts as an appellate court and reviews the bankruptcy court's legal determinations de novo and findings of fact for clear error.'" In re Falcon Prods., Inc. , 497 F.3d 838, 841 (8th Cir. 2007) (quoting In re Fairfield Pagosa, Inc. , 97 F.3d 247, 252 (8th Cir. 1996)). See also Fed.R.Bankr.P. 8013. The district court may affirm, reverse or modify the bankruptcy court's ruling or remand the case for further proceedings. Fed.R.Bankr.P. 8013.
Isley's statement of the issues on appeal asserts that the bankruptcy court erred when it denied the debtor's motion to avoid the lien. (ECF No. 5). In her brief, Isley asserts that the court erred in overruling the motion to avoid the lien when neither the creditor nor trustee filed an objection; in not allowing her to claim a work tool exemption in accordance with state statutes; and in improperly applying the federal work tool exemption to deny her motion. She also argues that she is entitled to the use of the state exemption to exempt assets she can avoid due to the debtor's non-purchase money security interest. (Pl.'s Brf at 1.)
In its text order denying Isley's motion to avoid the lien, the bankruptcy court referred to its order in In re Cardwell, No. 13-40623. (Doc. 29). The facts in Cardwell are similar to those in the present case. The debtors owned two motor vehicles which they used to travel to and from their respective places of employment, but the vehicles were not otherwise used in connection with the debtors' employment. A bank held a claim against the debtors in the amount of $24, 466.44, which was secured in part by a nonpossessory, nonpurchase-money security interest in both vehicles. The debtors claimed exemptions in the vehicles in the total amount of $2, 000. Id.
The debtors filed a motion to avoid the lien in the vehicles pursuant to 11 U.S.C. § 522(f)(1)(B)(ii) of the Bankruptcy Code, and the bank filed an objection. The bank asserted that the vehicles did not constitute tools of the trade under federal law and, therefore, the debtors could not use §522(f) to avoid its lien. The ...