IN RE: MUFEED AYYAD  DEBRA L. AYYAD CASE NO. 93-51255

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

IN RE:

MUFEED AYYAD

DEBRA L. AYYAD CASE NO. 93-51255

d/b/a Youngs Market

DEBTORS

MEMORANDUM & ORDER

This case was heard by the court on February 25, 1994, on the motion of the debtors, pursuant to 11 U.S.C. § 522(f)(2), to avoid the lien of Kentucky Finance Company as impairing the exemption of the debtors in certain personal property.

Kentucky Finance Company has filed a response disputing the entitlement of the debtors to an exemption in some of the items of property.

In Schedule C to their joint petition the debtors claimed an exemption in household furnishings as follows:

The joint petition of the debtors was filed on August 10, 1993. In their Individual Statement of Intent accompanying the petition the debtors indicated the lien of Kentucky Finance Company on miscellaneous personal property will be avoided pursuant to § 522(f) and the property will be claimed as exempt.

The section 341 meeting was held on September 21, 1993. The time for objecting to the exemptions claimed by the debtors expired 30 days thereafter, on or about October 21, 1993. Rule 4003(b). Kentucky Finance Company did not object to the exemptions claimed by the debtors. Therefore, the debtors are entitled to the exemptions as claimed. Taylor v. Freeland & Kronz, 112 S.Ct. 1644 (1992).

The debtors' motion to avoid the lien of Kentucky Finance Company as a nonpossessory, nonpurchase-money lien that impairs the exemption of the debtors in the property in question was filed December 6, 1993.

The court does not interpret section 521 of the Bankruptcy Code, 11 U.S.C. § 521, as requiring the debtors to file a motion to avoid the lien of Kentucky Finance Company within 30 days after the filing of their Statement of Intention. That interpretation would not preserve the right of a creditor to object to exemptions in instances where the filing of the Statement of Intention is delayed as permitted by § 521. The statute seems to require performance only in respect to surrender or redemption of property or reaffirmation of the indebtedness thereon. The debtors could not perform unilaterally their stated intention to avoid the lien of Kentucky Finance Company. Ultimately, it is only the court and not the debtors that could avoid the lien on the property of the debtors.

All creditors including Kentucky Finance Company and the trustee were afforded ample opportunity to object to the exemptions claimed by the debtors within the time permitted by Rule 4003(b).

Because Kentucky Finance Company failed to object to exemptions claimed by the debtors within the time permitted by the

Federal Rules of Bankruptcy Procedure, the creditor may not challenge the validity of the exemption at a later time in response to a motion to avoid the creditor's lien, even if the debtors did not have a legitimate basis for claiming the exemption.

Dated: March 21, 1994

By the court -

Joe Lee, Chief Judge

Copies to:

Steve Wides

David G. Perdue

Lucinda Hall