MEMORANDUM AND ORDER
MERRITT S. DEITZ, Jr., Bankruptcy Judge.
The debtor, a real estate broker and salesman, seeks to avoid a lien on his automobile by claiming it as exempt under 11 U.S.C. § 522(f)(2)(B) as a "tool of the trade" essential for continuation of his occupational pursuits.
It is undisputed that the plaintiff, Credithrift of America, Inc., holds a non-possessory, non-purchase money security interest in the automobile of the debtor, Donald Dubrock. The balance outstanding on the debt secured by the automobile, a 1974 Cadillac, is $4,760.00.
Support for Dubrock's contention that his auto is a tool of the trade may be found in a number of state court decisions.
Federal courts employing the Bankruptcy Act of 1898 have also examined the validity of exempting motor vehicles used for a business purpose as "tools of the trade".
Whenever confronted with the question of whether an automobile qualifies for the tool-of-trade exemption, both state and federal jurists have rooted their conclusions in the fact of the case before them.
Considering those facts, courts have generally held that an automobile may be a tool of trade if it is necessary for and is used in connection with one's trade.
Upon analysis of the case law, one can discern in which instances treatment of a car as a tool of the trade should be favorably received. Most like this case is Sun Ltd. v. Casey,
Generally, a car is classified a tool of trade only if the occupation of its owner is uniquely dependent on its use. It is not sufficient if one's dependence on the car is limited to use for travel to and from work.
Plaintiff relies upon Credithrift of America, Inc. v. Meyers
In every sense, Dubrock's use of his car is necessary to carry on his business. A salesman of real estate must have constant and
Credithrift asserts that the enumeration of an automobile elsewhere in the exemption provision
The well-settled rule that exemption statutes are to be liberally construed
The description of an object as a "tool" necessarily implies a classification based upon that object's functional and utilitarian purpose in the hands of its owner or user. While an automobile never ceases to be an automobile, its function may also require its designation as a tool of trade. Such is the case here.
The tool-of-trade exemption has heretofore been applied against the debtor's equity in the property he seeks to exempt. It was not employed as a means for lien avoidance. In this instance, Dubrock has no equity in his car, and attempts to avoid Credithrift's lien.
Section 522(f)(2)(B) of the Bankruptcy Code
It should not automatically be presumed, however, that the application of § 522(f) necessarily permits total avoidance of a valid lien that is a non-possessory, non-purchase money security interest. The lien may be avoided only to the extent of the debtor's allowable exemption, with the remainder of the lien being otherwise enforceable.
To determine the extent to which one is entitled to avoid a lien under subsection (f), reference must be made to either the state or Reform Act exemption schedule. This matter arising under the federal exemption schedule, we need only to consider the impact of subsection (f) on the exemptions provided in § 522(d).
Because § 522(f) is applied in conjunction with § 522(d), it must be determined what is, in the words of subsection (f), "an exemption to which the debtor would have been entitled".
Clearly, the avoidance of a lien against a tool of trade necessitates the application of the tool-of-trade exemption provision, Section 522(d)(6).
But neither the exemption provisions, nor Dubrock's lien avoidance capabilities, end there.
Under § 522(d)(5),
In the instant case, personal property exemptions, including the debtor's automobile, total only $1,687.40. The debtor owns no realty.
As is indicated in the Congressional Report,
In this case, if Dubrock had full equity in his vehicle and its value exceeded a specific exemption, he could easily avail himself of § 522(d)(5) to exempt the car totally.
Likewise, the "spill-over" effect of paragraph (d)(5) permits the total avoidance of Credithrift's lien. In essence, the interplay between subsections (d) and (f) of § 522 has resulted in Dubrock's being furnished with full equity in his automobile. Credithrift is left with an entirely unsecured claim.
We note by way of obiter that the exemption schedule provided in 11 U.S.C. § 522(d) is no longer available to persons filing in this state. The General Assembly of the Commonwealth of Kentucky has made mandatory the application in bankruptcy of Kentucky's exemption provisions.
Like the federal exemption, Kentucky allows an exemption for "the tools of any individual debtor necessary in his trade".
The Kentucky exemption chapter co-exists with, but does not displace, the lien avoidance section of 11 U.S.C. § 522(f).
Upon the foregoing reasoning and authorities, it is hereby
ORDERED that the motion to avoid the lien on the debtor's automobile is sustained. It is further ordered that the complaint of Credithrift of America, Inc., to lift the automatic stay is dismissed. This is a final order. Judgment shall be entered accordingly.
(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 —
(d) The following property may be exempted under subsection (b)(1) of this section:
(5) The debtor's aggregate interest, not to exceed in value $400 plus any unused amount of the exemption provided under paragraph (1) of this subsection, in any property.