A DEBTOR’S RIGHT TO AVOID JUDGMENT LIENS; IS IT TIME TO REVISIT In Re: Levinson?
By: Robert L. Pryor
While a bankruptcy discharge discharges most debts, it does not automatically avoid liens. When a creditor sues, obtains a judgment, and dockets it in the county where the Debtor’s homestead is located, the lien created upon the Debtor’s homestead remains unaffected and continues as an in rem claim against that property (although the Debtor’s in personam liability may have been otherwise discharged). In order to avoid the judgment lien itself, a Debtor must look to certain very limited sections of the Bankruptcy Reform Act of 1978, as amended, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code” or “Code”) to determine whether there is a separate specific statutory authorization which would allow the Debtor to avoid and thus remove that judgment lien from the property as well. Section 522(f) is generally regarded as the principal and most powerful vehicle to accomplish this objective. However, under the district court decision, In re Levinson, 395 B.R. 554 (E.D.N.Y. 2008), the ability to utilize this section to facilitate a Debtor’s fresh start has been meaningfully eroded.1 It is submitted that both fundamental logic as well as a rapidly expanding body of case law outside of the Eastern District of New York would suggest that a re-analysis of the holding of Levinson may be timely.
In Levinson, the Debtor claimed a homestead exemption (at that time $50,000, now $165,550) in the home he owned with his wife as tenants by the entirety. He claimed, consistent with the then-prevailing viewpoint, that the value of his interest in the home should be valued at onehalf of the total value of the property, the other one-half being ascribed to his wife who had not joined him in filing his Chapter 7 bankruptcy petition. The District Court affirmed the lower court