LOCATION:Cuyahoga County Courthouse
DOCKET NO.: 89-1008
DECIDED BY: Rehnquist Court (1990-1991)
LOWER COURT: United States Court of Appeals for the Eleventh Circuit
CITATION: 500 US 305 (1991)
ARGUED: Nov 05, 1990
DECIDED: May 23, 1991
Robert L. Fishell – on behalf of the Petitioner
Timothy B. Dyk – on behalf of the Respondent
Media for Owen v. Owen
Audio Transcription for Opinion Announcement – May 23, 1991 in Owen v. Owen
William H. Rehnquist:
The opinion of the Court in No. 89-1008, Owen against Owen will be announced by Justice Scalia.
This case presents a problem concerning the interaction of two provisions of the Bankruptcy Code.
One of which allows individuals to exempt property from the bankruptcy estate and one of which permits them to avoid judicial liens on that exempt property.
The problem is raised because the Code permits the states to define what exemptions their citizens may take and does not limit the state’s power to define these exemptions.
Thus, the question presents itself whether a state may define its exemptions so as to exclude from those exemptions property encumbered by a judicial lien thereby, in effect, nullifying the federal lien avoidance power for those state-created exemptions.
In an opinion filed with the Clerk today, we hold that a state’s excepting from its exemptions property encumbered by a judicial lien will not affect the operation of the federal lien avoidance power.
The Code gives the Bankruptcy Court the power to avoid a lien to the extent that such lien impairs an exemption to which the debtor would have been entitled, and that is the crucial language, would have been entitled under the section defining the exemptions.
To make sense of the term “would have been entitled”, we must ask would have been entitled but for what?
In applying the same statutory provision to federal exemptions, Bankruptcy Courts have uniformly asked whether the lien impairs an exemption to which the debtor would have been entitled but for that lien.
That is they determined first what exemption the debtor would have been entitled to without the lien at question, and then determine whether the lien impairs that exemption.
We see no reason to read the statute differently in the context of state exemptions.
Thereto, the court should ask what exemption the debtor would enjoy but for the lien in question, and then determine whether the lien impairs that exemption.
The Court of Appeals for the Eleventh Circuit though otherwise and its judgment is therefore, reversed and the case remanded for further proceedings.
Justice Stevens has filed a dissent.