Matter of Maddox

United States Court of Appeals,

Fifth Circuit.

No. 93-7266.

In the Matter of James A. MADDOX, et al., Debtors.

TOWER LOAN OF MISSISSIPPI, INC., Appellant,

v.

James A. MADDOX, Jr., et al., Appellees,

and

Harold J. Barkley, Jr., Trustee, Appellee.

March 16, 1994.

Appeals from the United States District Court for the Southern
District of Mississippi.

Before HIGGINBOTHAM and WIENER, Circuit Judges, and KAUFMAN,*
District Judge.

WIENER, Circuit Judge:

Today we address two questions arising under the Bankruptcy

Code: (1) Whether the recent Supreme Court case of Owen v. Owen1

has overruled our holding and method in Matter of McManus2 and the

line of cases following it, so that a debtor may now avoid a

nonpossessory, nonpurchase-money lien under § 522(f)3 on property

exempt from seizure under state law, even though that lien falls

*
District Judge of the District of Maryland, sitting by
designation.
1
500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991).
2
681 F.2d 353 (5th Cir.1982).
3
11 U.S.C. § 522(f). All references to sections in the
opinion are to sections contained in Title Eleven of the United
States Code, unless otherwise indicated.

1
within a state law exception to such an exemption; and (2) whether

a chapter 13 trustee has standing under § 1302 to avoid liens under

§ 522(f). We answer both questions affirmatively.

I

FACTS AND PROCEEDINGS

The facts in this case are undisputed. Creditor-Appellant

Tower Loan of Mississippi, Inc. ("Tower Loan") lent money to each

of the several Debtors-Appellees (individually, "Debtor"). As

security for these loans, each Debtor granted Tower Loan a

nonpossessory, nonpurchase-money lien on various items of personal

property. Many of these enumerated items are susceptible of

classification as property that is both exempt under state law and

also eligible for lien-avoidance under § 522(f).4

Each Debtor-Appellee sought protection under Chapter 13 of the

Bankruptcy Code. Sixteen of these cases were consolidated in the

bankruptcy court and form the subject matter of the instant appeal.

These cases vary somewhat in their procedural particulars; and

these variations are relevant to the issue whether the chapter 13

trustee, Trustee-Appellee Harold J. Barkley, Jr. ("Trustee"), has

standing to seek avoidance of liens under § 522(f).

In three of these sixteen cases the Debtor himself or herself

initiated the motion to avoid liens under § 522(f). In each of the

remaining thirteen cases, however, the Trustee initiated the

4
As explained more fully below, to qualify in the instant
case as exempt property subject to avoidance under § 522(f), that
property first must fall within an applicable state exemption,
such as MISS.CODE ANN. § 85-3-1, and second must be of the type
for which a lien may be avoided under § 522(f).

2
motion. In twelve of these remaining thirteen cases the individual

Debtors subsequently joined in the Trustee's avoidance motion,

leaving only one case in which a Debtor did not join. In one of

those twelve cases the Debtor joined the Trustee's motion only

after the bankruptcy court "coerced" that Debtor to join.5 In the

thirteenth case, the Trustee has continued prosecuting the

lien-avoidance motion despite the lack of any action on the part of

the Debtor, either to join or to oppose the motion.

In regard to the two issues relevant to this appeal, the

bankruptcy court determined that: 1) a Debtor in Mississippi may

now use § 522(f) to avoid a nonpossessory, nonpurchase-money

security interest in property (such as household furnishings and

goods) that is exempt under MISS.CODE.ANN. § 85-3-1; and 2) a

chapter 13 trustee has standing to file a motion to avoid such

liens.6 The bankruptcy court entered orders as to each Debtor

accordingly, which orders Tower Loan appealed to the district

court. The Debtor who had been coerced to join the motion did not

5
In this case, the bankruptcy court sustained the Trustee's
objection to the plan of the Debtor, an objection that was
premised on the failure of the Debtor to take action to avoid a
lien under § 522(f). In sustaining this objection, the
bankruptcy court ordered the Debtor either to join the motion of
the Trustee or face dismissal of his chapter 13 proceeding. Not
surprisingly, the Debtor subsequently joined.
6
The bankruptcy court adopted the reasoning used by the
bankruptcy court in In re Kennedy, 139 B.R. 389
(Bkrtcy.N.D.Miss.1992). According to the parties, this case is
currently on appeal to the district court, which has held it in
abeyance pending our resolution of these issues.

3
appeal, however.7 In each instance the district court affirmed.

Tower Loan timely continues its appeal to this court.

II

DISCUSSION

A. Lien Avoidance Under § 522(f) and State Exemptions

The first issue we address in this appeal arises out of the

intersection of the lien-avoidance provision in § 522(f) and the

exemption provision in § 522(b). Subsection (f) of § 522 provides

that a debtor may avoid a lien on property to the extent to "which

he would have been entitled" to an exemption under subsection (b)

of that same section. This ability to avoid liens under subsection

(f) is available only for 1) judicial liens on exempt property,8

and 2) nonpossessory, nonpurchase-money security interests on

exempt property that affect:

(A) [H]ousehold furnishings, household goods, wearing apparel,
appliances, books, animals, crops, musical instruments, or
jewelry that are held primarily for the personal, family, or
household use of the debtor or the dependent of the debtor;

(B) implements, professional books, or tools, of the trade of
the debtor or the trade of a dependent of the debtor; or

(C) professionally prescribed health aids for the debtor or a
dependent of the debtor.9

In determining the universe of exempt property, subsection (b)

specifies that a debtor has the option to elect to come under the

7
Consequently, for the reasons expressed infra note 41, we
express no opinion on the question whether a chapter 13 trustee
may coerce or otherwise override the choices of a debtor
regarding lien avoidance under § 522(f).
8
11 U.S.C. § 522(f)(1).
9
11 U.S.C. § 522(f)(2).

4
umbrella of either the federal list of exemptions or the state

list, unless the state has "opted-out" of the federal exemption

statute. If the state has opted out then the debtor may claim only

those exemptions on the state list.10 In our circuit, Louisiana11

and Mississippi12 have opted out of the federal exemption statute;

Texas apparently has not.13 Nonetheless, all three states provide

that the state exemptions remain subject to certain security

interests or liens placed on exempt property, i.e., exceptions to

the exemptions.14

1. Owen and Matter of McManus

In Matter of McManus15 this court determined that the debtor

took "the bitter with the sweet" when he used the Louisiana

exemption statute as the basis of avoiding liens under § 522(f).

In sum, the exemption available under Louisiana law remained

limited by the enumerated exceptions to that exemption. Thus, a

10
See 11 U.S.C. § 522(b); In re Allen, 725 F.2d 290, 292
(5th Cir.1984).
11
LA.REV.STAT.ANN. § 13:3881(B).
12
MISS.CODE ANN. § 85-3-2.
13
See In re Allen, 725 F.2d at 292 (observing that Texas law
permits an election between the federal and the state list of
exemptions); see also 3 COLLIER ON BANKRUPTCY (Lawrence P. King,
ed.) ¶ 522.02 (listing opt-out states).
14
In Louisiana the exemptions remain subject to Chattel
Mortgages and security interests under Chapter 9 of the Louisiana
Commercial Laws. LA.REV.STAT.ANN. § 13:3885. In Texas the
exemptions remain subject to "encumbrances properly fixed on the
property." TEX.PROP.CODE ANN. § 42.001. In Mississippi the
exemptions remain subject to a "statutory lien or a voluntary
security interest." MISS.CODE ANN. § 85-3-1(d).
15
681 F.2d at 356-57.

5
debtor could not use § 522(f) to avoid a lien on exempt property

when that lien fell within an exception to that exemption under

state law.16 McManus has been applied by this court to the Texas

exemption statute in Matter of Allen17 and Matter of Bessent18 and

to the Mississippi exemption statute in Matter of Fox.19

Almost a decade after our opinion in McManus, the Supreme

Court in Owen v. Owen20 addressed whether a judicial lien placed on

exempt property could be avoided under § 522(f) in the face of a

state law specifying that the judicial lien at issue fell within an

exception to the state exemption statute. Parsing the plain

wording of § 522(f), the Court focused on the phrase "would have

been entitled" and observed that, as applied to federal exemptions,

this language has been correctly construed to mean " "would have

been' but for the lien at issue."21 The Court concluded that there

was no valid basis for distinguishing between the approach used for

state as opposed to federal exemptions. As the Court stated:

The question then becomes whether a different interpretation
should be adopted for State exemptions. We do not see how
that could be possible. Nothing in the text of § 522(f)
remotely justifies treating the two categories of exemptions

16
Id. at 357.
17
725 F.2d at 292-93.
18
831 F.2d 82 (5th Cir.1987).
19
902 F.2d 411, 413-14 (5th Cir.1990).
20
500 U.S. 305, ----, 111 S.Ct. 1833, 1834-35, 114 L.Ed.2d
350, 356-57 (1991).
21
Id. at 359 (emphasis by Court).

6
 differently.22

The threshold question we must answer is whether Owen has

overruled our McManus line of cases. Tower Loan attempts to

distinguish Owen factually as a case involving a judgment lien

rather than a nonpossessory, nonpurchase-money lien like the ones

here under review. We conclude, however, that this is a classic

example of a distinction without a difference. Section 522(f)

provides in pertinent part:

Notwithstanding any waiver of exemptions, the debtor may avoid
the fixing of a lien on an interest of the debtor in property
to the extent that such lien impairs an exemption to which the
debtor would have been entitled under subsection (b) of this
section, if such lien is:

(1) a judicial lien; or

(2) a nonpossessory, nonpurchase-money security interest
...23

The Court in Owen indisputably construed the "would have been

entitled" language of § 522(f) to mean that a debtor may avoid

liens that are exceptions to the exemption statute under state law:

As the structure of the statute demonstrates, that is the operative

language applicable to all subsections of § 522(f), including the

one relating to nonpossessory, nonpurchase-money security

interests.

The rationale of the Owen decision is perhaps just as

important. As one bankruptcy court aptly observed:

22
Id. at 360. The Court went on to observe that, even
assuming that clear policy considerations would allow the Court
to create a distinction not grounded in statutory text, no such
considerations were present. Id.
23
11 U.S.C. § 522(f) (emphasis added).

7
 Central to Owen 's analysis is the following proposition:
[A]lthough a state may elect what property is exempt under
state law, federal law determines the availability of lien
avoidance under § 522(f) of the Code. That manner of applying
§ 522(f) is to be adopted under both the state and federal
exemption schemes.24

We agree. Consequently, we conclude, and therefore hold today,

that McManus and our subsequent opinions grounded in it have been

overruled by Owen to the extent that those cases held

lien-avoidance under § 522(f) to be limited by state exceptions.

2. Applying Owen to the Instant Case

Tower Loan asserts essentially two alternative contentions to

argue that, even if Owen has overruled McManus, Owen does not mean

that the liens at issue here are avoidable. First, Tower Loan

insists that, under the exemption scheme in Mississippi, liens of

this type attach before the property becomes eligible for

exemption. According to Tower Loan, this means that such liens are

not fixed "on an interest of the debtor" as required by § 522(f).25

Tower Loan is correct to the extent of its assertion that

under Mississippi law the identities of the particular items of

property that are subject to an exemption are not known until such

property is selected by the debtor.26 And Tower Loan appears to be

24
In re Kelly, 133 B.R. 811, 813 (Bktcry.N.D.Tex.1991).
Every court that has considered this issue has concluded that
Owen overruled the McManus line of cases. See Id.; In re
Kennedy, 139 B.R. at 396-97.
25
Cf. Owen, 500 U.S. at ---- - ----, 111 S.Ct. at 1837-38,
114 L.Ed.2d at 359-60 (remanding to determine whether the
judicial lien attached before or simultaneously with the debtor's
acquisition of the property).
26
See MISS CODE ANN. § 85-3-1(a).

8
correct factually in its assertion that such properties are not

selected until after the lien has attached—typically this selection

will not occur until the debtor has entered bankruptcy or until his

property has been or is about to be subjected to seizure.

Nonetheless, Tower Loan makes an impermissible leap of logic when

it concludes that the debtor's failure to select the property

before the lien attaches means that the lien does not attach to "an

interest of the debtor." Tower Loan is reading this to mean "an

exemptible interest of the debtor," but the statute merely states

"an interest of the debtor in property."27 Nothing in the statute

specifies the need for attachment to an exemptible interest of the

debtor in the property; at a minimum, the Debtor's ownership

interest in the property at issue here suffices. Accordingly, we

reject Tower Loan's first argument.

For its second contention, Tower Loan relies on the nature of

a chapter 13 bankruptcy to urge that Owen is inapposite: Section

522(f) does not apply at all in chapter 13, insists Tower Loan,

because liens such as nonpossessory, nonpurchase-money ones do not

"impair an exemption" to which the debtor would otherwise be

entitled. This is so, Tower Loan urges, because a chapter 13

debtor gets to keep his property so long as he proposes and

executes an acceptable confirmation plan under chapter 13. And the

amount due under that confirmation plan is determined by the

27
11 U.S.C. § 522(f) (emphasis added). See Farrey v.
Sanderfoot, 500 U.S. 291, ----, 111 S.Ct. 1825, 1828-29, 114
L.Ed.2d 337, 344-45 (1991) (concluding that the debtor must have
an interest in the property at issue before being able to avoid a
lien under § 522(f)).

9
"disposable income test" of the debtor without reference to whether

the underlying debts are secured or unsecured.28

But under the plain language of the Bankruptcy Code, § 522(f)

does apply in chapter 13 bankruptcies: Section 103(a) expressly

provides, inter alia, that Chapter 5—which includes §

522(f)—applies to cases under Chapters 7, 11, 12, or 13.29 Tower

Loan's "no practical impairment" argument is not sufficient to

refute this explicit language. Moreover, Tower Loan's argument has

been rejected by the only circuit court that has expressly ruled on

this issue.30

In addition, Tower Loan's "no practical impairment" argument

proves to be factually wrong in at least one situation. A debtor

must cross a "best interests of the creditor" threshold to have a

confirmable plan in chapter 13.31 Simply put, under § 1325 the plan

generally must provide that the unsecured creditors receive at

least as much value as they would have received in a chapter 7

liquidation, and that the secured creditors must receive the

28
11 U.S.C. § 1325(b)(1)(B).
29
11 U.S.C. § 103(a).
30
The parties cite only one circuit court decision that has
ruled on this issue: In re Hall, 752 F.2d 582, 589-90 (11th
Cir.1985) (holding that § 522(f) applies in chapter 13
bankruptcies). Our independent research discloses that every
other circuit addressing lien avoidance in chapter 13 has simply
assumed that a chapter 13 debtor may avoid liens under § 522(f).
See In re McKay, 732 F.2d 44, 48 (3rd Cir.1984); Mead v. Mead,
974 F.2d 990, 991-92 (8th Cir.1992); In re Billings, 838 F.2d
405, 406 (10th Cir.1988).
31
See 11 U.S.C. § 1325.

10
present value of their collateral.32 Thus, under relatively limited

circumstances, avoiding a lien under § 522(f) would allow a debtor

to file a chapter 13 bankruptcy that he would not otherwise have

been able to file; he may do so because § 522(f) converts the

creditor's status from secured to unsecured, thereby changing the

amount due that creditor.33 Our comfort level in the result we

reach here is increased when we realize that, by allowing such a

debtor to pursue a chapter 13 bankruptcy, we further the

congressional preference for chapter 13 repayment plans over

32
11 U.S.C. § 1325(a)(4) & (5); see also In re Driver, 133
B.R. 476, 479 (Bkrtcy.S.D.Ind.1991) (discussing same); 5 COLLIER
at ¶¶ 1325.05-.06 (laying out application of standards in §
1325(a)(4) & (5)).
33
The amount due that creditor may substantially change
because of the interplay between § 522 and § 1325. Under § 1325
that creditor, as a secured creditor with "an allowed secured
claim," see § 1325(a)(5) & FED.R.BANKR.P. 3001-08, is entitled to
receive the present value of his collateral. 11 U.S.C. §
1325(a)(5). If, however, the lien is avoided this creditor drops
to unsecured status with two consequences: He is now only
entitled to receive what an unsecured creditor "would have
received" in a chapter 7 liquidation, and, since the lien may
only be avoided on property exempt under § 522(b)—which by
definition means that that property has been removed from "the
property of the estate"—what that unsecured creditor (indeed, any
unsecured creditor) "would have received" on that property is
nothing under Chapter 7. (Of course, this creditor, as an
unsecured one, would still remain entitled to receive his
pro-rata share of the payments made by the debtor for that class
of creditors).

Albeit in relatively limited circumstances, the
foregoing change in amount due may sometimes mean the
difference between having a confirmable as opposed to an
unconfirmable plan under Chapter 13. For a useful
hypothetical illustrating this proposition, see McLaughlin,
Lien Avoidance by Debtors in Chapter 13 of the Bankruptcy
Reform Act of 1978, 58 AM.BANKR.L.J. 45, 64-65 (1984).

11
chapter 7 liquidations.34

B. Standing of Chapter 13 Trustee to Assert Lien Avoidance

In the instant case, the Trustee initiated 13 of the 16

motions to avoid liens under § 522(f). Tower Loan argues that the

Trustee's peculiar status in Chapter 13 eschews his standing to

assert § 522(f) unilaterally. Although this issue may have been

mooted for the eleven motions voluntarily joined in by the Debtors,

it has not been mooted for at least one of the two remaining

Trustee-initiated motions.35 In that one, the Trustee is still

proceeding in the absence of the Debtor. Thus, the issue whether

a chapter 13 trustee, proceeding alone, has standing to seek

34
The House report accompanying the Bankruptcy Reform Act of
1978 states:

The premises of the bill with respect to consumer
bankruptcy are that use of the bankruptcy law should be
a last resort; that if it is used, debtors should
attempt repayment under Chapter 13 ...

....

... In addition, [Chapter 13] satisfies many debtors'
desire to avoid the stigma attached to straight
bankruptcy and to retain the pride attendant on being
able to meet one's obligations. The benefit to
creditors is self-evident: their losses will be
significantly less than if their debtors opt for
straight bankruptcy.

H.R.REP. No. 95-595, 95th Cong., 2d Sess., at 118, reprinted
in 5 U.S.C.C.A.N. 5787, 6078-79 (1978).
35
Surprisingly, the Trustee does not claim that this joinder
moots this issue as to these motions. Because we conclude that
the issue of standing is squarely raised for at least one of the
two remaining motions, we need not address this issue. Although
the other remaining motion involved the coerced joinder of the
Debtor, we express no opinion regarding whether this joinder was
proper. See supra note 7.

12
lien-avoidance under § 522(f) is squarely presented. The limited

jurisprudence on this point discloses that no resolution—or even

consensus—has yet been achieved. Further, it appears that no

circuit court has yet addressed this issue.36

1. The Debtor-Creditor Relationship in Chapter 13

In order to understand the practical import of trustee

standing in Chapter 13, we first briefly address the nature of the

debtor-creditor relationship in Chapter 13. As noted, in certain,

relatively limited circumstances the debtor will have an incentive

to avoid liens under § 522(f). In the typical case, however, the

debtor will be indifferent to lien-avoidance: Assuming that the

plan is confirmable—as it typically is under Chapter 13—the debtor

retains control of "the property of the estate";37 his payment

during the life of the plan is determined by the "disposable

income" test without regard to the nature of the underlying debt;38

and, after completion of the plan, the debtor receives a discharge

of all debts irrespective of whether they are secured or

unsecured.39

36
The Trustee cites only one case that squarely addresses
this issue, which ruled in the affirmative. In re Kennedy, 139
B.R. at 390-92. Tower Loan cites several bankruptcy court
decisions that, although not squarely addressing this precise
issue, contain reasoning which indicates that such standing would
not be granted. E.g., In re Ciavarella, 28 B.R. 823, 825-28
(Bankr.S.D.N.Y.1983) (concluding that a chapter 13 trustee cannot
avoid preferential transfers under § 547(b) because the role of
the chapter 13 trustee is limited).
37
11 U.S.C. § 1327(b).
38
See 11 U.S.C. § 1325(b)(1).
39
11 U.S.C. § 1328.

13
 Thus, in the typical case, lien avoidance under § 522(f) only

adjusts the distribution of payments among the creditors: The

putative secured creditor drops into the unsecured creditor class,

thereby decreasing his share of payments, while the share of

payments received by the original class of unsecured creditors

increases concomitantly. Consequently, in the great majority of

chapter 13 cases, the trustee is asserting lien avoidance under §

522(f) to protect the interests of this original class of unsecured

creditors.

2. Statutory and Historical Analysis

Tower Loan maintains that the plain language of § 522(f)

interdicts trustee standing. Section 522(f) begins by providing:

"Notwithstanding any waiver of exemptions, the debtor may avoid the

fixing of a lien ..."40 Tower Loan reasons that the express

inclusion of one—the debtor—implies the exclusion of the other—the

trustee. According to Tower Loan, this conclusion is strengthened

by the use of the discretionary term "may": If a chapter 13

trustee could proceed without a debtor then that trustee would

negate the debtor's prerogative to pursue or not pursue lien

avoidance. Again, we must disagree.

We first observe that Tower Loan overstates the issue

presented: We only address today whether a chapter 13 trustee has

standing to assert lien avoidance; the issue whether that trustee

40
11 U.S.C. § 522(f) (emphasis added).

14
may also override a debtor's preference is not before us.41 And,

even though Tower Loan's plain-language argument has some force, it

fails or refuses to recognize that a chapter 13 trustee's authority

to act—and hence his standing—is derived from more than one section

of the Bankruptcy Code.42 In particular, § 1302 generally sets out

the powers and duties of the chapter 13 trustee.

Before we parse § 1302 we observe that its plain language—like

that of § 522—does not explicitly resolve the precise issue before

us. Thus to understand § 1302 better, we briefly review the

41
Tower Loan's argument regarding debtor choice is premised
in the instant case on the notion that the bankruptcy court
improperly compelled a Debtor to join the Trustee's
lien-avoidance motion. The Debtor who was compelled to join that
motion has not appealed, however, and thus that Debtor could not,
and has not, joined in Tower Loan's brief. See supra note 7 and
accompanying text. Consequently, Tower Loan's argument here is
nothing more than an attempt to assert the rights of a third
party, i.e., that Debtor's purported freedom from compelled
joinder.

We generally do not grant a litigant standing to assert
the rights of others. E.g., Searcy v. Houston Lighting &
Power Co., 907 F.2d 562, 564 (5th Cir.1990). Given that
there was little impedient to that Debtor asserting a right
to be free from compelled joinder, and given that creditors
such as Tower Loan are usually in an adversarial
relationship with their debtors, we find little reason to
depart from that general rule here. See, e.g., Friedman v.
Harold, 638 F.2d 262, 264-68 (1st Cir.1981) (concluding same
in the context of bankruptcy litigation); see generally
ERWIN CHEMERINSKY, FEDERAL JURISDICTION § 2.3.4 (1989) (observing
that third party standing is generally not recognized unless
the third party is unable to assert his or her own rights,
or unless there is a close relationship between the advocate
of those rights and the third party).
42
We of course read the Bankruptcy Code in pari materia to
ascertain its meaning. E.g., In re Howard, 972 F.2d 639, 640
(5th Cir.1992) (citing United States Savings Ass'n v. Timbers of
Inwood Forest, 484 U.S. 365, 370-72, 108 S.Ct. 626, 629-31, 98
L.Ed.2d 740 (1988)).

15
genesis of Chapter 13.

Chapter 13 required substantial legislative attention by

Congress43 when it drafted and enacted the Bankruptcy Reform Act of

1978 (the "Bankruptcy Act").44 Such attention was required because

the forerunner of Chapter 13—Chapter XIII (which had been enacted

in 193845)—had failed to keep pace with the exponential growth in

consumer credit following World War II.46 Chapter XIII—which had

been the logical chapter within which to deal with consumer debt in

the bankruptcy context—suffered from numerous defects, including

the erratic status of secured creditors47 and the uncertain role of

the chapter XIII trustee.48 Moreover, because consumer credit was

(and is) usually extended in reliance on future income49—and because

the defects in Chapter XIII often left debtors with no choice but

to liquidate present assets—the consumer credit industry had

43
5 COLLIER at ¶ 1300.01.
44
Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 92 Stat.
2549 (1978).
45
52 Stat. 930 (1938); see also Perry v. Commerce Loan Co.,
383 U.S. 392, 393-97, 86 S.Ct. 852, 853-56, 15 L.Ed.2d 827 (1966)
(discussing enactment and amendments to Chapter XIII).
46
H.R.REP. No. 95-595 at 116, reprinted in 5 U.S.C.C.A.N.
5787, 6076 (1978).
47
S.REP. No. 95-989, 95th Cong., 2d Sess. at 13, reprinted in
5 U.S.C.C.A.N. 5787, 5799 (1978).
48
5 COLLIER at ¶ 1300.01; see also Tselikis, The Chapter 13
Trustee: "Trustee" or Disbursing Agent?, 21 ME.L.REV. 53 (1969).

49
See, e.g., 5 COLLIER at ¶ 1300.01.

16
devised various onerous techniques to protect their loans.50

Congress addressed some of the problems caused by these

onerous consumer credit practices by enacting § 522(f).51 In

addressing the problems engendered by the ambivalent status of the

chapter XIII trustee, Congress devised a broad role for trustees

under Chapter 13. As the Senate Report accompanying § 1302 states:

The principal administrator in a chapter 13 case is the
chapter 13 trustee. Experience under Chapter XIII of the
Bankruptcy Act has shown that the more efficient and effective
wage earner programs have been conducted by standing chapter
XIII trustees who exercise a broad range of responsibilities
in both the design and effectuation of debtor plans.

. . . . .

Subsection (b)(1) [of § 1302] makes it clear that the
chapter 13 trustee is no mere disbursing agent ...52

This role was given effect through the enactment of § 1302 into law

as part of the Bankruptcy Act.

When we examine § 1302 closely, we discern that Congress has

given the chapter 13 trustee a broad array of powers and duties.

Like the chapter 7 trustee, the chapter 13 trustee serves the

interests of all creditors primarily by collecting payments from

debtors and disbursing them to creditors. And the role of the

chapter 13 trustee in this regard is virtually identical to the one

50
Of particular note to Congress was the technique of
acquiring an overly broad security interest in all of a
consumer's household and personal goods, a technique that often
prevented the debtor from gaining the "fresh start" from
bankruptcy desired by Congress. See H.R.REP. No. 95-595 at 117,
reprinted in 5 U.S.C.C.A.N. 5787, 6077 (1978).
51
See id.
52
S.REP. No. 95-989 at 139, reprinted in 5 U.S.C.C.A.N. 5787,
5925 (1978).

17
played by the chapter 7 trustee: Only the "asset" collected and

disbursed differs. In Chapter 7 the "asset" is the property of the

debtor; in Chapter 13 the "asset" is the future income of the

debtor.

But a chapter 13 trustee "is no mere disbursing agent."53 Of

particular importance to the instant case, § 1302 grants the

chapter 13 trustee various powers to ensure that such collections

and disbursements occur equitably, according to the dictates of

Congress. Under subsection (b)(1) of § 1302, the chapter 13

trustee has the power contained in § 704(5) to "examine proofs of

claims and object to the allowance of any claim that is improper."54

And under subsection (b)(2) of § 1302 that trustee is granted

standing to "appear and be heard" in a hearing to confirm a Chapter

13 plan.

When these subsections are read from the perspective of the

historical development of Chapter 13—and in light of the role that

Congress envisioned for the chapter 13 trustee—the conclusion that

these subsections support the proposition that a chapter 13 trustee

has standing to avoid liens under § 522(f) is unassailable. As

noted, under subsection (b)(2) the chapter 13 trustee is vested

with standing to participate in the confirmation of a plan. Such

participation would be eviscerated if the chapter 13 trustee were

to lack standing—whether at the hearing or at an earlier stage of

the case—to prevent the inequitable distribution of payments caused

53
Id.
54
11 U.S.C. § 704(5).

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by failure to avoid a lien under § 522(f).

Such standing comes from subsection (b)(1). Under that

subsection, the Trustee's avoidance of the lien under § 522(f) may

be properly characterized as nothing more than an objection to the

secured claim represented by that lien as improper, i.e., that by

virtue of § 522(f) that claim ought to be classified as unsecured.55

And this objection is, of course, precisely the type of action

encompassed within the power to "examine proofs of claims and

object to the allowance of any claim that is improper" incorporated

in § 1302(b)(1).56 This conclusion is further reinforced by the

antidiscrimination principle contained in § 1322(a)(3) of Chapter

13, providing as it does that "if the plan classifies [unsecured]

claims, [the plan shall] provide the same treatment for each claim

within a particular class."57 In sum, this unsecured claim has been

treated unlike others by being incorrectly classified as secured.

Thus, this putative secured claim is likewise improper under §

1322(a)(3)—and hence subject to objection by the chapter 13 trustee

under § 1302(b)(1).

In view of the foregoing, we hold today that a chapter 13

trustee has standing to avoid liens under § 522(f). By so doing,

we are acknowledging that the only chapter 13 actor who typically

has an interest in lien-avoidance—the chapter 13 trustee—has

55
See Kennedy, 139 B.R. at 391.
56
This power is included in § 1302 by the incorporation of §
704(5). See 11 U.S.C. §§ 704(5) & 1302(b)(1).
57
11 U.S.C. § 1322(a)(3).

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authority to do so, thereby effecting an equitable distribution of

payments among all creditors.

III

CONCLUSION

Bankruptcy courts are important institutions in our modern

economy, operating to ensure, to the extent practicable, the

equitable distribution of assets when financial misfortune or

misplanning befalls a debtor. Trustees play a significant role in

this process, helping to see to it that such distributions follow

the dictates of Congress.

When the relevant statutes and sections are read in light of

the historical development of Chapter 13, it becomes apparent that

Congress did not intend to exclude chapter 13 trustees from playing

such roles. Accordingly, we hold today that a chapter 13 trustee

has standing to seek lien-avoidance under § 522(f). We also

acknowledge that Owen has overruled our McManus line of cases.

Consequently, we hold today that, although states remain free to

define the property eligible for exemptions under § 522(b), the

particular liens that may be avoided on that property are

determined by reference to federal law; specifically, § 522(f) of

the Bankruptcy Code.

For the foregoing reasons, the orders of the bankruptcy court

appealed from herein are, in all respects,

AFFIRMED.

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