(E.D. Ky. Aug. 21, 2015)
The district court affirms the bankruptcy court’s order avoiding the mortgage foreclosure deficiency judgment liens on the debtor’s residence. The creditor had obtained a deficiency judgment following foreclosure of its mortgage lien and filed a judgment lien for the deficiency, which encumbered the debtors’ residence. The debtors moved to avoid the lien under 11 U.S.C. § 522(f) and the bankruptcy court granted the motion. The creditor appealed, arguing that § 522(f)(2)(C), which provides that judgments arising out of mortgage foreclosures are not avoidable, applied to the deficiency judgment lien. The court recognizes the split in authority on the issue, but ultimately concludes that § 522(f)(2)(C) merely provides that judgments in foreclosure actions (i.e. sale orders enforcing the mortgage lien) cannot be avoided such that the mortgage lien is avoided. The section does not apply to deficiency judgment liens. Opinion below.
Author: Matt Lindblom