Opinion
Case No. 99-34895-T, Adv. Proc. No. 02-3041-T
August 16, 2002
MEMORANDUM OPINION
Trial was held August 15, 2002, on debtor's complaint to avoid a preference pursuant to 11 U.S.C. § 547(b). The court took ruling under advisement.
The court will enter judgment for plaintiff debtor.
Facts.
Debtor filed a chapter 7 petition on July 16, 1999. She received her discharge in bankruptcy on October 22, 1999, and the case was closed on October 27, 1999.
On January 16, 2002, debtor filed a motion to reopen the case for the purpose of avoiding two judgment liens recorded by defendant Federal Employees' Credit Union of Petersburg within 90 days of debtor's filing her chapter 7 petition, which were not discovered until after the case was closed.
The case was reopened by the court's order entered February 8, 2002. This adversary proceeding was commenced by debtor's complaint filed April 12, 2002.
In summary, the complaint alleges the necessary elements for a determination that two judgments recorded by defendant within 90 days of debtor's bankruptcy are avoidable preferential transfers pursuant to 11 U.S.C. § 547(b). The total amount of the judgments was $13,379.01.
Defendant's recording of the judgments constituted preferential transfers avoidable under § 547(b).
This finding is based upon the allegations of the complaint, the defendant's answer, the exhibits received at trial, and the parties' stipulation at trial. However, see footnote 2.
Defendant's two judgments are liens against debtor's real property located at 8012 Clovertree Court, Chesterfield County, Virginia.
Conclusions of Law.
The court previously granted debtor's motion to reopen her case for the purpose of seeking to avoid defendant's judgment liens. Bankruptcy Code § 350(b) allows the court to reopen a closed case "to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b).
At trial, the parties stipulated that the only issue for the court was whether the judgment liens could be avoided after debtor had received her discharge in bankruptcy.
Although debtor's complaint alleges that the recording of the two judgments constituted preferential transfers avoidable under § 547(b), the parties' stipulation at trial and their argument indicated that the actual dispute here concerns whether debtor may avoid the judicial liens pursuant to § 522(f)(1)(A). Accordingly, the court treats debtor's complaint as a request for lien avoidance rather than a preference action.
The court further notes that the statute of limitations on commencing a preference action expired when the case was closed. 11 U.S.C. § 546(a). Even if this defense had been raised, the court would have allowed debtor to amend the complaint to assert lien avoidance under § 522(f).
Thus the only issue raised by the parties' stipulation is whether plaintiff's judicial liens may be avoided even though debtor has received her discharge. Because there is no factual dispute, the court finds that all requirements for avoidance of the judicial liens under § 522(f) have been established.
At trial defendant's counsel cited no authority for his position that it is too late for the court to allow avoidance of its liens. He acknowledged that the liens would be avoidable but for debtor's discharge. To further paraphrase counsel, he said that "these are creatures of statute and should be strictly construed."
The court is aware of no provision that requires a lien avoidance to take place before a debtor receives a discharge, and contrary to defendant's argument, § 522(f) has no time limitation on lien avoidance. In fact, there is ample authority for the court to reopen a closed case for the purpose of allowing a debtor to file a lien avoidance proceeding "unless the creditor has been unduly prejudiced by delay on the debtor's part." L. King, Collier on Bankruptcy ¶ 350.03[3] (15th Ed. Rev.). Defendant has made no claim of undue prejudice based upon any delay by debtor.
The court finds the lien avoidance action has been brought within a reasonable time under the circumstances, and there is no undue prejudice to defendant. Plaintiff's counsel is directed to submit a sketch order in conformity with this opinion.