This matter is before the Court on the debtors' Motion for Order Avoiding Lien on Exempt Property. The Motion was brought pursuant to 11 U.S.C. '522(f), asking that the lien of creditor Kentucky Finance Company, Inc. ("KFC") on a diamond cluster ring in which the debtors have claimed an exemption be avoided. KFC has filed a Response. The debtors claim the exemption pursuant to KRS 427.010(1) and have listed the value of the ring as $4500.00 and their claim as $3000.00. An appraisal made in 1985 valued the ring at $4700.00.

The statute under which the Motion was brought, 11 U.S.C. '522(f)(2)(A) states:

(f) 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--


(2) a nonpossessory, nonpurchase-money security interest in any--

(A) household 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 a dependent of the debtor;

It is the debtors' position that the ring in question is jewelry held primarily for the personal use of debtor Sherry Thomas. Her affidavit states that the ring was a gift from her father-in-law upon the birth of the debtors' son, and that it thereby has a uniquely personal value to her. She further states that she does not wish to keep the ring for investment purposes. KFC's position is that the ring is a luxury item and therefore not within the contemplation of '522(f).

Since the determination of what constitutes exempt property is made pursuant to state law, the court must look to the pertinent statute, KRS 427.010(1). That section provides that personal property of an individual debtor in the form of "[a]ll household furnishings, jewelry, personal clothing and ornaments not to exceed $3000.00 in value" is exempt. The section does not elaborate on the meaning of the term jewelry, nor does the definition section, KRS 427.005, define it. KFC argues that a recent amendment to KRS 427.005 which limits the definition of jewelry to wedding rings controls. This amended version of the statute became effective on July 15, 1992, some time after the debtors filed their Motion.

KFC does not provide any authority in support of the proposition that the amended statute should be applied retroactively, as would be the case herein. The debtors, on the other hand, argue effectively that the statute should not be applied retroactively. They point out that legislation may not be applied retroactively without clear legislative intent, and that absent that intent the presumption is for prospective application. See University of Louisville v. O'Bannon, Ky., 770 S.W.2d 215, 216 (1989). This Court agrees with the debtors' position on this point.

Therefore, applying KRS 427.010(1) without a limiting definition leads to the conclusion that the ring in question may be claimed as exempt. The question which remains to be resolved is its value. The debtors have set the value of the ring at $4500.00 without any supporting documentation. The copy of the appraisal submitted by KFC indicates that it was prepared by a jeweler, specifically describes the ring, and assigns it a value of $4700.00. This Court will accept the appraised value.

The debtors list the exemptions claimed pursuant to KRS 427.010(1), which allows each debtor a $3000.00 exemption in personal property, as various household furnishings (itemized on the schedule) worth $1500.00 and the ring worth $4500.00 for a total of $6000.00. They list their exemptions pursuant to KRS 427.160 (the "wild card") as clothes worth $800.00, $45.00 in cash, a picture worth $25.00 and a $10.00 bank balance for a total of $880.00. That section allows each debtor a $1000.00 general exemption to be applied to any kind of property. The debtors herein have calculated their exemptions as though all the property claimed is joint property. The subject ring has, however, been consistently portrayed as solely Sherry Thomas's property, and each debtor's exemptions must stand on their own.

Assuming therefore, that the value of the subject ring is attributable only to Sherry Thomas, her exemptions would be calculated as follows: the ring is valued at $4700.00; her half of the property claimed pursuant to KRS 427.010(1) (other than the ring) is valued at $750.00; her half of the property claimed pursuant to KRS 427.160 is valued at $440.00. She is therefore claiming exemptions in property valued at a total of $5890.00. This amount exceeds the total exemptions available to her by $1890.00.

In consideration of all of the foregoing, therefore, it is the opinion of this Court that Sherry Thomas may avoid the lien of Kentucky Finance Company, Inc. on the subject ring to the extent of her exempt interest, or $2810.00. Kentucky Finance Company, Inc. may enforce its lien to the extent of the remainder, or $1890.00. An order in conformity with this opinion will be entered separately.


By the Court -












Copies to:


Barbara Anderson, Esq.

David G. Perdue, Esq.

Charles Freihofer, Esq., Trustee