Holloway v. John Hancock Mutual Life Insurance

                  United States Court of Appeals,

                          Eleventh Circuit.

                            No. 95-8215.

   In re Linda Sue HOLLOWAY & Eldridge Hampton Holloway, Jr.,
Debtors.

 Linda Sue Holloway, Eldridge Hampton Holloway, Jr., Plaintiffs-
Appellants,

                                   v.

 JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellee,

                  Robert E. Brizendine, Trustee.

                          April 25, 1996.

Appeal from the United States District Court for the Northern
District of Georgia. (1:94-CV-1220-ODE), Orinda D. Evans, Judge.
(Bkcy. No. 91-82491-HR), Hugh Robinson, Jr., Judge.

Before TJOFLAT,   Chief   Judge,   and   RONEY   and   CAMPBELL*,   Senior
Circuit Judges.

     LEVIN H. CAMPBELL, Senior Circuit Judge:

     Debtors-appellants Eldridge and Linda Holloway appeal from a

judgment of the United States District Court for the Northern

District of Georgia affirming a decision of the Bankruptcy Court

for the Northern District of Georgia.

                                   I.

     In October of 1991, appellee John Hancock Mutual Insurance

Company obtained a judgment against Eldridge Holloway in the State

Court of Cobb County.   The judgment became a lien on the Holloways'

residence, located in Georgia, in the amount of $26,792.97.           The

Holloways filed a joint petition for bankruptcy in December of

1991.

        *
      Honorable Levin H. Campbell, Senior U.S. Circuit Judge for
the First Circuit, sitting by designation.
         In the bankruptcy proceeding, the Holloways sought to avoid

John Hancock's judgment lien on their real property. Unless a lien

is avoidable and the debtor has taken timely steps to avoid it, the

lien survives the discharge in bankruptcy.1      Title 11 U.S.C. §

522(f) allows debtors to avoid the fixing of certain liens if the

liens impair exemptions. An exemption is an interest of the debtor

carved out of the bankruptcy estate for the benefit of the debtor

and thereby shielded from creditors' claims.         Section 522(f)

provides:

     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.
                                 2
11 U.S.C. § 522(f)(1) (1993).        The referenced subsection (b)

exemptions include the federal bankruptcy exemptions enumerated in

11 U.S.C. § 522(d). Alternatively, however, § 522(b) allows states

to opt out of these federal exemptions listed in § 522(d).    States

may write their own exemptions, in which case the only exemptions

available to the debtor become those legislated by the opt-out

state.     Georgia has opted out of the § 522(d) exemptions and,

pursuant to the invitation extended to the states in § 522(b), its

     1
      A discharge in bankruptcy "voids any judgment ... to the
extent that such judgment is a determination of the personal
liability of the debtor." 11 U.S.C. § 524(a)(1) (emphasis
added). However discharges in bankruptcy do not affect liability
in rem. Thus, liens on property remain enforceable after
discharge unless avoidable under the Bankruptcy Code.
     2
      Section 522(f) was amended in 1994 by the Bankruptcy Reform
Act, Pub.L. No. 103-394, 108 Stat. 4112, 4132, 4133, 4137, 4145
(Oct. 22, 1994), but the pre-1994 language, as cited in the text
above, governs this dispute. See infra note 10.
legislature has enacted a list of exemptions available to Georgia

domiciled debtors.        See O.C.G.A. §§ 44-13-100(a) and (b).        Georgia

law allows a debtor to exempt from the bankruptcy estate his

aggregate interest, not exceeding $5000 in value, in real or

personal property used as a residence, and his aggregate interest,

not   exceeding    $400    plus   the   unused   amount   of   the   homestead

exemption, in other property.3
          In order to exempt property under §§ 522(b) and (f), the

debtor must file, in the bankruptcy proceeding, a list of the

property that the debtor claims as exempt.           11 U.S.C. § 522( l ).

On January 22, 1992, the Holloways filed with the bankruptcy court

an exemption schedule which provided, in part:

      Property     Exemption Provision Value of Exemption



      1984 Honda          § 44-13-100(a)(1), (3), and (6)            $3000.00



      Checking Account         § 44-13-100(a)(1) and (6)             $1758.46


      3
       The Georgia exemptions provide in relevant part:

             (a) In lieu of the exemption provided in Code Section
             44-13-1, any debtor who is a natural person may exempt,
             pursuant to this article, for purposes of bankruptcy,
             the following property:

                  (1) The debtor's aggregate interest, not to exceed
             $5,000.00 in value, in real property or personal
             property that the debtor or a dependent of the debtor
             uses as a residence ...;

                  (6) The debtor's aggregate interest, not to exceed
             $400.00 in value plus any unused amount of the
             exemption provided under paragraph (1) of this
             subsection, in any property.

      O.C.G.A. §§ 44-13-100(a)(1), (6).
      Cash and savings      § 44-13-100(a)(1) and (6)            $1324.00



      Residence § 44-13-100(a)(1)       $   0.00



     Assets from Business        § 44-13-100(a)(1) and (6)
$5217.54

                                —————

The Holloways thus listed their home as exempt under the Georgia

law but gave $0.00 as the value of the exemption.          The exemption

for their residence was not assigned any value because, as both

parties concede, the Holloways personally retained no quantifiable

equity in their home, their ownership being subject to a first

security deed and note, a second security deed and note, and a tax

lien from the Internal Revenue Service.      These security interests

exceeded, in total, the market value of the residence.                 The

Holloways, listing the value of their homestead exemption as $0.00,

proceeded to allocate their combined unused $10,000 homestead

exemption to their personal property—their automobile, their cash

and   savings,   their   checking   account,       and   their    business

assets—pursuant to O.C.G.A. § 44-13-100(a)(6).4

      The Holloways filed a motion with the bankruptcy court to

avoid John Hancock's judgment lien on their residence pursuant to

      4
      Under O.C.G.A. § 44-13-100(a)(3), the Holloways could each
exempt up to $1000 of their interest in a motor vehicle. The
Holloways exempted a total of $3000 of their Honda; thus, $2000
of the value of the Honda was exempted pursuant to 44-13-
100(a)(3) and $1000 of the value of the Honda must have been
exempted pursuant to § 44-13-100(a)(6). Therefore, the Holloways
claimed exemptions under §§ 44-13-100(a)(1) and (6) for personal
property of $9,300 ($1000.00 + $1758.46 + $1324.00 + $5217.54).
11 U.S.C. § 522(f)(1) (1993).      John Hancock filed a response

alleging that its lien in no way impaired "an exemption to which

the debtor[s] would have been entitled" because the Holloways had

no equity in their property and had listed no value in their

homestead exemption.

     On January 4, 1993, the bankruptcy court issued the following

order granting the Holloways' motion for lien avoidance:

     After consideration of the argument of counsel for Movants and
     Respondents, this Court finds the judgment lien of Respondent
     John Hancock Mutual Insurance Company ... avoidable.       The
     judgment lien of Respondent is therefore avoided upon the
     exempted personal property of the Debtors. The real property
     of the Debtors appears to have no equity over and above the
     preexisting first and second security deeds and tax lien to
     which the judgment of Respondent could attach; because the
     judgment did not attach to any real property pre-petition,
     there is no lien avoidance which must be had as to Debtors'
     real property and Respondent's judgment.

Holloway v. John Hancock Mutual Ins. Co. (In re Holloway), No. A91-

82491-HR (Bankr.N.D.Ga. Dec. 31, 1992).   Then on August 12, 1993,

the bankruptcy court issued another order, partially vacating its

earlier order:

     [T]he Judgment lien against the exempted personal property of
     the Debtors shall remain void. However, any reference in the
     January 4, 1993 Order of this Court regarding the avoidance of
     Respondent's Judgment against Debtors' real property or the
     validity of the Judgment itself is hereby rescinded, vacated,
     and set aside.

Holloway v. John Hancock Mutual Ins. Co. (In re Holloway), No. A91-

82491-HR (Bankr.N.D.Ga. Aug. 12, 1993).    On March 14, 1994, the

bankruptcy court denied the Holloways' motion to alter or amend the

August 12, 1993 order.    The Holloways appealed to the district

court.

     The district court found that the bankruptcy court had denied

lien avoidance as a matter of federal law, but affirmed the
bankruptcy court's judgment on what the district court described as

independent state law grounds.        The district court ruled that, by

listing their residence as an exemption but giving $0.00 as the

value of the exemption, the Holloways had acted in a contradictory

manner that was insufficient to plead the exemption under Georgia

law.   Because § 522(f) only allows avoidance of liens that impair

"an exemption to which the debtor would have been entitled," the

district court found that John Hancock's lien could not be avoided.

The Holloways now appeal from the judgment of the district court.

                                      II.

       This court reviews de novo the district court's determination

of law in a bankruptcy case.      See Wrenn v. American Cast Iron Pipe

Co. (In re Wrenn), 40 F.3d 1162, 1164 (11th Cir.1994).            In deciding

whether Georgia debtors may avoid a judicial lien pursuant to §

522(f), courts commonly determine, first, whether under Georgia

state law the debtors are entitled to the exemption they claim and,

second,    whether   the   judicial    lien   would   in   fact   impair   the

exemption as a matter of federal bankruptcy law.           Cravey v. L'Eggs

Prods., Inc. (In re Cravey), 100 B.R. 119, 121 (Bankr.S.D.Ga.1989);

Register    v.   Reese (In re Register),              37   B.R.    708,    709

(Bankr.N.D.Ga.1983).       Before reaching these questions, we first

address the Holloways' claim that the case should be remanded

because the bankruptcy court failed to state its findings of fact

and conclusions of law.

A. Federal Rule of Civil Procedure 52

       The bankruptcy court's order denying avoidance of John

Hancock's judicial lien on the Holloways' residence contained no
express findings of fact and conclusions of law.                      In the district

court, and now on appeal, the Holloways argue that the case should

be remanded to the bankruptcy court because of its purported

disregard of Fed.R.Civ.P. 52, which requires courts to state their

findings of fact specially and conclusions of law separately in

certain          circumstances.5       The    district      court    found    that       the

bankruptcy         court's    orders   contained       implicit     factual       findings

concerning the Holloways' interest in their real property, and John

Hancock's judgment lien on that real property, as well as "the

implicit legal conclusion that Debtors could not prevail under §

522(f)."           Holloway    v.   John     Hancock    Mutual      Ins.    Co.    (In    re

Holloway), No. 1:94-cv-1220-ODE (N.D.Ga. Jan. 20, 1995).                                 The

relevant          characteristics      of    the    secured      interests        in     the

residential real estate are not in dispute.                      The district court

thus ruled that there was a sufficient basis for it to review the

legal conclusions of the bankruptcy court.

       We agree. Even assuming for purposes of argument, although we

need       not    decide,    that   Rule    52   applies,    there    are    sufficient

undisputed facts in the record for us to resolve the issues on

appeal, which, being legal in nature, are subject to our de novo

review.          See Holtkamp v. Littlefield (In re Holtkamp), 669 F.2d

505, 510 (7th Cir.1982) ("[I]t is not error to fail to make formal

findings of fact or conclusions of law when the basis of the

bankruptcy judge's decision is clear and, thus, reviewable ... or

where there is no factual dispute.") (internal citations omitted).


       5
      Bankruptcy courts must follow Rule 52 when conducting
adversary proceedings. Fed.R.Bankr.P. 7052.
Cf. Federal Land Bank v. Cornelison (In re Cornelison), 901 F.2d

1073,    1075   (11th   Cir.1990)      (remanding   because   the    bankruptcy

court's factual findings were unclear).             While our legal analysis

differs from that of the district court, it rests on a similar

factual frame which is adequate for our purposes.

B. O.C.G.A. § 44-13-100(a)(1)

        We   turn   first   to   the   district   court's   ruling    that   the

Holloways' claim of a homestead exemption failed under state law

because of the lack of any value in their ownership interest in

their residence.

        John Hancock urges this court to hold that the Holloways'

asserted homestead exemption of $0.00 was contradictory on its

face, rendering their purported claim of exemption insufficient to

plead the Georgia homestead exemption.               It contends that zero

equity in a residence can give a debtor no right to the exemption

either legally or practically because exemptions apply only to a

debtor's financial equity in property.            According to John Hancock,

the Holloways, lacking any residual monetary equity in their

residence, could make no valid claim to the homestead exemption to

support avoidance of John Hancock's judgment lien on the residence.

        In response to John Hancock's argument, the Holloways argue

that the Georgia statute allows a debtor to exempt (up to $5000)

his "aggregate interest" in his residence, and this term is broad

enough to include the debtor's possessory and other non-monetary

rights in the residence apart from whatever financial equity, if

any, the homeowner may yet retain. See Maddox v. Southern Discount

Co. (In re Maddox), 713 F.2d 1526, 1530 (11th Cir.1983) ("The word
"interest' is a broad term encompassing many rights of a party,

tangible, intangible, legal and equitable, and the court will not

redefine the term to reach the result sought by the appellant.").

The right to claim an exemption for an unvalued possessory interest

can be critical since, once freed from the burden of debts by the

bankruptcy proceeding, the homeowner may be able to meet the

expenses    of   mortgages   and   other    non-avoidable   claims   on    the

property.    In such event, the debtor's ability to have established

an exemption based on his possessory interest alone can be key to

his ability under § 522(f) to ward off judgment liens that would

otherwise prevent the "fresh start" that bankruptcy presumably

affords.    (It was this argument that persuaded Congress in 1994 to

amend § 522(f) so as expressly to allow owners of fully-encumbered

property to avoid judicial liens.          See supra note 2 and infra note

10.)

       The district court ruled that, under Georgia law, a debtor may

not claim a valid exemption by listing a residence in which the

debtor has no equity as an exemption with a value of $0.00.               This

is a close question.     The Georgia Supreme Court has not passed on

it, and barring certification, we are left to determine on our own

how " "we believe a [Georgia] court would decide ...' "         Wammock v.

Celotex Corp., 835 F.2d 818, 820 (11th Cir.1988) (citing Green v.

Amerada-Hess Corp., 612 F.2d 212, 214 (5th Cir.), cert. denied, 449

U.S. 952, 101 S.Ct. 356, 66 L.Ed.2d 216 (1980)). 6            The guidance

       6
      Although we have discretion to certify controlling
questions of Georgia law to the Georgia Supreme Court, Ga. Const.
art. VI, § 6, para. 4; O.C.G.A. § 15-2-9; Ga.Sup.Ct.R. 37, we
do not do so, in part because, regardless of the outcome of our
state law inquiry, appellants cannot prevail under federal
found in the statutory language and in decisions of the lower

courts of Georgia and of the federal courts construing Georgia law

is limited.

     The most relevant Georgia state court decision is that of the

Georgia Court of Appeals, dealing with the homestead exemption.

Wallis v. Clerk, Superior Court of DeKalb County, 166 Ga.App. 775,

305 S.E.2d 639 (1983).    But Wallis, involving a different question,

did not arise in the lien avoidance context of § 522(f).          In

Wallis, a debtor sued because he was denied any proceeds from his

homestead exemption when his house was sold as part of a bankruptcy

proceeding. The Georgia Court of Appeals ruled against the debtor,

holding that his equity in the house had been eliminated by a

secured mortgage that had a higher priority than did the debtor's

homestead exemption.     In so ruling, the court stated that,

     [a] bankrupt is entitled to claim a homestead exemption only
     from his "aggregate interest" in real property. This means
     that only the unencumbered portion of the property is to be
     counted in computing the value of the property for the
     purposes of determining the exemption.      Appellant had no
     aggregate interest in the property against which to assert his
     claimed homestead exemption.

Id. 305 S.E.2d at 641 (internal quotation marks and citations

omitted).     While this language can be read as stating a broad

principle contrary to the Holloways' position, it arose in a

situation so different as to render its relevance doubtful. Unlike

the debtor in Wallis, the Holloways are not seeking to place a

monetary value on their homestead exemption, but instead are only

asking that their admittedly valueless homestead exemption be


bankruptcy law, see infra Part II.C.     The state law question is
not, therefore, "controlling."
legally recognized as an exemption so that it may be claimed under

§ 522(f) for purposes of avoiding John Hancock's judicial lien.

     Federal bankruptcy cases in Georgia have not followed Wallis

when interpreting another Georgia exemption, the exemption for

household goods. 7    In    Maddox, 713 F.2d at 1527-29, this court

adopted the opinion of the bankruptcy court allowing a debtor to

avoid a lien on household goods exempted pursuant to O.C.G.A. § 44-

13-100(a)(4)   even    though     the   lien   exceeded   the   value   of    the

household goods and the debtors had no equitable interest in the

goods.   The court held that a debtor need not have equity in

household   goods    to   claim   an    exemption     under   Georgia   law   for

purposes of § 522(f) lien avoidance.           Id.;   see also Moyer v. Fleet

Finance (In re Moyer), 39 B.R. 211, 212-13 (Bankr.N.D.Ga.), aff'd

746 F.2d 814 (11th Cir.1984), cert. denied, 471 U.S. 1053, 105

S.Ct. 2113, 85 L.Ed.2d 478 (1985).         And in Bland v. Finance One (In

re Bland), 793 F.2d 1172, 1174-75 (11th Cir.1986) (en banc), this

court held that Wallis is irrelevant to claims under § 522(f),

because Wallis involved a first-in-priority purchase money secured

mortgage that could never be avoided under § 522(f).                     Still,

Maddox, Moyer, and Bland are not directly in point because the

liens that encumbered the property were the very liens the debtors

were trying to avoid pursuant to § 522(f), while in the present

case, the Holloways' property is fully encumbered by unavoidable

liens notwithstanding which they are seeking recognition of an

exemption in order to avoid an additional judicial lien.

     7
      Georgia law allows a debtor to exempt up to $3,500 of
"[t]he debtors' interest" in household goods. O.C.G.A. § 44-13-
100(a)(4).
      In a case perhaps closest to the present, a bankruptcy court

in the Southern District of Georgia followed the reasoning of

Maddox, Moyer, and Bland, rather than Wallis, and found that a

debtor can avoid a judicial lien on a residence that is fully

encumbered by another unavoidable security interest.                In Cravey v.

L'Eggs    Prods.,     Inc.     (In    re       Cravey),     100      B.R.   119

(Bankr.S.D.Ga.1989), the debtors' residence had a fair market value

of   $85,000   but   was   subject   to    a   deed   to   secure    debt   with

outstanding indebtedness of $83,891.65.          As part of the bankruptcy

proceedings, the debtors conveyed legal title to their residence to

the secured creditor and, in addition, sought to claim a homestead

exemption under Georgia law so as to avoid the judgment liens of

other unsecured creditors pursuant to § 522(f).                   The judgment

lienholders contended that the debtors could not claim an exemption

under Georgia law because they no longer possessed an ownership

interest in their residence.         The court found that although the

debtors had transferred the security deed and therefore legal title

to the secured creditor, the debtors still retained the right of

possession and the right to reclaim legal title by payment of the

debt.    This equitable estate in the land was held to satisfy the

Georgia law requirement of an "aggregate interest" in property.

The court held that the "debtors do possess an interest in their

residence which is exemptible under the Georgia exemption statute."

Id. at 122.

      In light of the above caselaw, we cannot say that, as the

district court believed, the Georgia courts would necessarily

refuse to recognize the Holloways' claim of exemption.               Still, the
answer is not free from doubt, and in light of our disposition of

the federal bankruptcy issue,           infra    Part   II.C,   we   think    it

unnecessary to decide whether under Georgia law an equitable

interest without any monetary value forms a sufficient basis upon

which to claim a valid exemption.               Instead, we shall assume,

without deciding, that the Holloways' claim of exemption in their

residence was valid under Georgia state law, and proceed next to

decide whether, as a matter of federal bankruptcy law, a lien can

be avoided under § 522(f) when, notwithstanding such a valid claim

of exemption, the debtor entirely lacks any financial equity in the

property claimed as exempt.

C. 11 U.S.C. § 522(f)(1)

         Section 522(f) allows a debtor to avoid the fixing of a lien

"on an interest of the debtor in property to the extent that such

lien impairs an exemption."        11 U.S.C. § 522(f) (1993).                John

Hancock    argues   that,   according   to   the   plain     language   of    the

statute, a "lien impairs an exemption" only to the extent that the

lien sought to be avoided reduces the value of the debtor's claimed

exemption.     Thus, it argues, a lien cannot be avoided over and

above the amount of the exemption.       The Holloways argue that a lien

impairs an exemption to the extent that there is no remaining

equity, above and beyond the sum of the unavoidable claims on the

property and the claimed exemption, upon which the lien can fix.

     The outcome of this dispute turns on the interpretation of the
                                                         8
"impairs an exemption" language of § 522(f),                 and courts have

     8
      We are dealing with the version of § 522(f) effective
before the 1994 Bankruptcy Reform Act. The 1994 amendments to
the Bankruptcy Code clarified the meaning of the phrase "impairs
disagreed over what constitutes impairment of an exemption as well

as to what extent a lien may be avoided when an exemption is

impaired.       See    e.g.,   In   re   Thomsen,     181    B.R.   1013,    1014-15

(Bankr.M.D.Ga.1995). When a debtor's equity in the exempt property

is zero because the property is fully encumbered by senior secured

unavoidable debts, some courts have held that there is no exemption

having any quantifiable value to impair, hence no impairment of an

exemption.      See e.g., Riddell v. N.C.R. Universal Credit Union (In

re Riddell), 96 B.R. 816, 818 (Bankr.S.D.Ohio 1989).                  These cases

follow the "plain language" of the statute and hold that § 522(f)

permits avoidance of a judicial lien only in the amount of the

debtor's exemption.          They reason that § 522(f) expressly permits

lien avoidance only "to the extent" that the lien impairs an

exemption.       The effect of this position is that the unavoided

portion of the lien survives bankruptcy and attaches to any equity

that accumulates post-petition.9              Another line of cases holds that

liens are fully avoidable even if there is no equity above and

beyond unavoidable liens and claimed exemptions upon which the

liens can attach.        See e.g., In re Magosin, 75 B.R. 545, 549-50

(Bankr.E.D.Pa.1987).         These cases reason that the entire judicial

lien above the amount of debtor's equity in the property must be

avoided to enable the debtor to obtain a "fresh start."                        This

position requires the court to recognize that a debtor's interest

in   property    is    not   limited     to   his   equity   but    also    includes

an exemption."        See supra note 2 and infra note 10.
      9
      Under Georgia law, a judicial lien is enforceable against
property of a debtor for up to 21 years. See O.C.G.A. §§ 9-12-
60—9-12-68.
equitable interests such as the right of possession, the right of

redemption and the right to create future equity. Under this broad

interpretation, impairment is said to be construed in a manner more

consistent with the fresh start purpose of the Bankruptcy Code

because the debtor is entitled to any post-petition appreciation or

build-up of equity in the property.         See e.g., Cravey, 100 B.R. at

122.     Given these two opposite constructions of § 522(f), courts

facing the issue before the 1994 Bankruptcy Reform Act were left to

decide between the plain language of § 522(f) and the "fresh start"

objectives of the Bankruptcy Code.

       For present purposes, this court's position in the debate is

pre-ordained by a prior decision of this court, to which we must

now adhere under principles of stare decisis.              In interpreting §

522(f), this court sided with the "plain language" position.                In

Wrenn v. American Cast Iron Pipe Co. (In re Wrenn), 40 F.3d 1162,

1166 (11th Cir.1994), we held that § 522(f) allowed a judgment lien

to be avoided to the extent of the Alabama homestead exemption, but

refused to allow the debtor to avoid the entire lien.              The Wrenn

court, relying on City Nat'l Bank v. Chabot (In re Chabot), 992

F.2d 891 (9th Cir.1993), reasoned that the plain meaning of §

522(f)    limits   lien   avoidance   to    the   extent   that   such   liens

interfere with the available exemptions as measured by the dollar

amount of the exemption claim.             Thus, "§ 522(f) entitles [the

debtor] to avoid [the judgment] lien only to the extent of the ...

homestead exemption" irrespective of the debtor's equity interest

in the property.    Wrenn, 40 F.3d at 1166-67.        Applying Wrenn to the

case before us, the Holloways can avoid John Hancock's lien on
their residence only to the extent of their homestead exemption.

Because the Holloways' claimed exemption was worth $0.00, they are

not entitled to any lien avoidance.

     The Holloways contend that the Bankruptcy Reform Act of 1994

effectively overrules Wrenn, and that a judgment lien can be

avoided to the extent that it impairs an exemption or exceeds the

amount of equity in the property.     See Thomsen, 181 B.R. at 1016-

1017 (holding that the Bankruptcy Reform Act effectively overruled

Wrenn).   Although the 1994 amendments to the Bankruptcy Code did,
in effect, overrule Wrenn prospectively,10 the Bankruptcy Reform Act

     10
      The interpretation of § 522(f) offered by debtors—that
judicial liens can be avoided even if property is fully
encumbered—has now been written into the federal law by virtue of
an explicit formula. The Bankruptcy Reform Act of 1994 amended §
522(f) by adding the following language defining the term
"impairment":

          (2)(A) For the purposes of this subsection, a lien
          shall be considered to impair an exemption to the
          extent that the sum of—

          (i) the lien;

          (ii) all other liens on the property;    and

          (iii) the amount of the exemption that the debtor could
          claim if there were no liens on the property;

          exceeds the value that the debtor's interest in the
          property would have in the absence of any liens.

     11 U.S.C. § 522(f)(2) (as added by the Bankruptcy Reform Act
     of 1994, Pub.L. No. 103-394, 108 Stat. 4112, 4132, 4133,
     4137, 4145 (Oct. 22, 1994)). In the section-by-section
     analysis of the Bankruptcy Reform Act, the amendments to §
     522(f) were explained as follows:

               Because the Bankruptcy Code does not currently
          define the meaning of the words "impair an exemption"
          in section 522(f), several court decisions have, in
          recent years, reached results that were not intended by
          Congress when it drafted the Code. This amendment
          would provide a simply arithmetic test to determine
stated, with several exceptions not relevant here, that "the

amendments made by this Act shall not apply with respect to cases

commenced under title 11 of the United States Code before the date

of the enactment of this Act [Oct. 22, 1994], and shall not make

appealable any decisions rendered in such cases."       Bankruptcy

Reform Act of 1994, Pub.L. No. 103-394, 108 Stat. 4112, 4132, 4133,

4137, 4145 (Oct. 22, 1994);     see also H.R.Rep. No. 835, 103rd

Cong., 2nd Sess. (Oct. 4, 1994),   reprinted in 1994 U.S.C.C.A.N.

3340.   The Holloways' bankruptcy proceeding, brought under Title
11, commenced well before 1994, hence they cannot avail themselves

of the 1994 amendments.   Unfortunately for them, Wrenn states the

controlling law during the relevant period.

                               III.

     We hold that the Holloways' claimed homestead exemption,


          whether a lien impairs an exemption....

               The decisions that would be overruled involve
          several scenarios. The first is where the debtor has
          no equity in a property over and above a lien senior to
          the judicial lien the debtor is attempting to avoid, as
          in the case, for example, of a debtor with a home worth
          $40,000 and a $40,000 mortgage. Most courts and
          commentators had understood that in that situation the
          debtor is entitled to exempt his or her residual
          interests, such as a possessory interest in the
          property, and avoid a judicial lien or other lien of a
          type subject to avoidance, in any amount, that attaches
          to that interest. Otherwise, the creditor would retain
          the lien after bankruptcy and could threaten to deprive
          the debtor of the exemption Congress meant to protect,
          by executing on the lien. Unfortunately, a minority of
          court decisions, such as In re Gonzalez, 149 B.R. 9
          (Bankr.D.Mass.1993), have interpreted section 522(f) as
          not permitting avoidance of liens in this situation.
          The formula in the section would make clear that the
          liens are avoidable.

     H.R.Rep. No. 835, 103rd Cong., 2nd Sess. (Oct. 4, 1994),
     reprinted in 1994 U.S.C.C.A.N. 3340.
assumed arguendo to be valid under Georgia law, was not impaired by

John Hancock's judicial lien, as required by 11 U.S.C. § 522(f)

(1993).   We thus AFFIRM the decision of the district court that

John Hancock's lien on the Holloways' residence cannot be avoided.