## Facts

- Dean and Michelle Kolich purchased a homestead in 1998, financing it with a loan secured by a first mortgage held by World Savings Bank.
- In 2000, Antioch Laurel Veterinary Hospital obtained and recorded a judgment of about $134,000, creating a judicial lien against the homestead.
- The Kolichs later filed Chapter 7 bankruptcy and claimed a homestead exemption.
- The Kolichs moved under 11 U.S.C. § 522(f) to avoid Antioch’s judicial lien as impairing the homestead exemption.
- The bankruptcy court limited avoidance rather than avoiding the lien in full.
- The Bankruptcy Appellate Panel reversed, applied § 522(f)(2)(A)’s impairment formula, and held Antioch’s lien avoidable in its entirety.
- Antioch appealed, arguing that a literal application of the formula produced an inequitable and “absurd” result in a low- or no-equity situation.

## Issues

1. Whether impairment of an exemption under 11 U.S.C. § 522(f)(2)(A) is determined by applying the statutory formula as written.
2. Whether a court may depart from § 522(f)(2)(A)’s formula to prevent an allegedly “absurd” or inequitable result.
3. Whether, under the formula, Antioch’s judicial lien on the homestead was avoidable in full.

## Decision

- The Eighth Circuit affirmed the Bankruptcy Appellate Panel.
- The court held that § 522(f)(2)(A) supplies a mandatory mathematical test for determining impairment.
- Applied to the Kolichs’ homestead, the formula showed that Antioch’s judicial lien impaired the homestead exemption and was avoidable in its entirety.
- The court rejected the argument that perceived unfairness or creditor “windfall” concerns justified modifying the statutory calculation.

## Legal Principles

- A debtor may avoid a judicial lien “to the extent” it impairs an exemption the debtor would otherwise be entitled to claim. 11 U.S.C. § 522(f)(1).
- Impairment is determined using the formula in 11 U.S.C. § 522(f)(2)(A): add (i) the lien at issue, (ii) all other liens, and (iii) the exemption amount; if the sum exceeds the property’s value, the judicial lien is avoidable to the extent of the excess.
- Courts must apply § 522(f)(2)(A)’s formula according to its plain terms; they may not revise it based on equitable concerns or because the result seems harsh to a judgment creditor.
- Complete avoidance of a judicial lien is permissible when the statutory calculation establishes full impairment of the exemption.

## Conclusion

The Eighth Circuit held that exemption impairment under § 522(f)(2)(A) is determined by a strict numeric test, and that applying the formula as written required full avoidance of Antioch’s judicial lien on the debtors’ homestead.


Kolich v. Antioch Laurel Veterinary Hosp. (In re Kolich), 328 F.3d 406 (8th Cir. 2003)