PETER McNIFF, United States Bankruptcy Judge.
THIS MATTER came before the court on the objection of the chapter 7 trustee, C. Edward Stirman, to a claim of a homestead exemption taken by the debtors, Douglass and Linda Thomas. The court held an evidentiary hearing on December 2, 1997. Now, having heard the arguments of the parties and considered the evidence and the applicable law, the court is prepared to rule.
Findings of Fact
The debtors listed a 1988 White/Volvo over-the-road semi-tractor and trailer with a value of $10,000 on Schedule B. Mr. Thomas claimed a tool of the trade exemption in the Volvo under Wyo. Stat. § 1-20-106(b). Mr. Thomas earns his living transporting commercial loads with the Volvo. The vehicle is encumbered by a consensual lien granted to Leoti Westfall, Mr. Thomas's mother, for a debt listed at $19,600. The Thomases have reaffirmed this obligation, and the time has passed in which the debtors can rescind.
From information obtained at the initial meeting of creditors, Mr. Stirman learned that the lien was granted and perfected on December 19, 1996. The obligation was incurred in 1994. The debtors' voluntary chapter 7 petition was filed July 28, 1997.
On August 28, 1997, the debtors amended their schedule C. They eliminated the tool of the trade exemption, and claimed a homestead exemption in the Volvo. The testimony at the hearing indicated that Mr. Thomas spends a considerable amount of time in the Volvo, stores his personal property in a Chevy van, and considers the truck his only home. There is no evidence about where Mrs. Thomas resides.
Mr. Stirman objected to the claimed homestead objection on two grounds. First, that under the plain language of Wyo. Stat. §§ 1-20-101 104(1997) an over-the-road vehicle, owned for commercial purposes, is not within the intent of the legislature's homestead exemption. Second, he argues that even if Mr. Thomas does live in the vehicle, the debtors are precluded from claiming an exemption by the provisions of 11 U.S.C. § 522(g).
Conclusions of law
The court has jurisdiction over these questions under 28 U.S.C. § 157(b) 1334. This is a core proceeding within the definition of § 157(b)(2)(B).
Taking the latter argument first, the court finds it dispositive. In some respects the trustee's argument is premature. He has not avoided the lien on the Volvo, an act which would make § 522(g) applicable. Nevertheless, the values of the lien and the Volvo asserted by the debtors make clear that there is no equity above the lien. Consequently, the court assumes that the trustee will not file an avoidance action if the exemption is sustained.
Understandably, the debtors have claimed an exemption in property which is fully encumbered, the legitimacy of which may determine their course of action also. Therefore, the court will rule on the § 522 question as a necessary and expedient result. See In re Trevino, 96 B.R. 608, 612 (Bankr.E.D.N.C. 1989); In re Ulrich, 203 B.R. 691, 693 (Bankr.C.D.Ill. 1997) (both courts ruling on issue despite similar circumstances of prematurity).
Mrs. Westfall is not a party to this proceeding, and the court cannot determine the validity of her lien, or any priority questions. However, the debtors do not dispute that the lien is a preferential transfer to an insider under 11 U.S.C. § 547.
The trustee argues that the debtors are not entitled to claim an exemption in the vehicle because if he avoids the lien, any claim of exemption is precluded by § 522(g) which states:
Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property that the trustee recovers under sections 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if —
(1) (A) such transfer was not a voluntary transfer of such property by the debtor; and
(B) the debtor did not conceal such property; or
(2) the debtor could have avoided such transfer under subsection (f)(2) of this section.
First, the debtors argue that § 522(g) is not effective until property is recovered for the estate, which in their view cannot occur because the Volvo is already property of the estate. The court finds that argument too simplistic.
Any exemption claimed before the lien is avoided is an exemption of value in the property, i.e., the equity above the amount of the lien. See Alfred v. Kingston, case no. 95-CV-152-B slip opinion (D.Wyo. October 25, 1995). The exemption does not encompass the value of the property encumbered by the consensual lien unless the lien is avoided or declared subordinate to the exemption. In this case, there is no equity upon which the exemption can be claimed before the lien is avoided and in that sense the claim of exemption is also premature. Any value recovered after avoidance of a lien is what § 522(g) is intended to address.
Second, the debtors argue that because § 522(g) does not list § 547 as a recovery option, § 522(g) is inapplicable in this case. The court agrees with the debtors that § 547 and 550 are separate in their function, and that § 522(g) speaks only in terms of § 550. But § 547 does not need to be listed because it is incorporated through § 550. See In re Smith, 105 B.R. 217, 219 (Bankr.W.D.N.Y. 1989) (because § 522(g) did not list § 544 the debtors could not claim an exemption).
A debtor is permitted to claim an exemption under § 522(g) after property is recovered for the estate. The court believes that is what occurs when a lien is avoided. Section 550 provides from whom a trustee may recover property whose transfer has been avoided. In re Sherman, 67 F.3d 1348, 1356 (8th Cir. 1995). Specifically, the section states that "to the extent that a transfer is avoided under section . . . 547 . . ., the trustee may recover, for the benefit of the estate, the property transferred, or . . . the value of the property from" the initial or immediate or mediate transferee.
When a trustee avoids a lien on property of the estate, the trustee is avoiding a transfer of an interest in property. To recover the value of that avoided interest, a trustee proceeds under § 550, either at the same time and in the same proceeding against the transferee, or in a different action if necessary. Thus, property value is recovered for the estate.
The court concludes that if Mr. Stirman were to avoid the lien, the debtors would be able to claim an exemption under § 522(g) if they meet two conditions. The debtors must show that the transfer was involuntary and that it was not concealed from the trustee.
In this case, the debtors have reversed the requirements of § 522(g) and argue that the trustee must prove both elements of the provision are satisfied in order to prevent the exemption. Neither the statutory language nor the case law supports such an interpretation. The burden is on the debtor to prove an involuntary transfer. In re Snyder, 108 B.R. 150, 152 (Bankr.N.D.Ohio 1989). In other words, the debtors must show that the transfer was not voluntary in order to be entitled to claim an exemption, and if they cannot, the inquiry ends. In re Glass, 60 F.3d 565, 569 (9th Cir. 1995); In re Gingery, 48 B.R. 1000 (Bankr.D.Colo. 1985).
Mr. Thomas admitted that the transfer was voluntary in the sense that he granted the lien of his own volition at the urging of family members. The nature of the transfer is in keeping with findings of other courts that the transfer was voluntary. In re Snyder, 108 B.R. at 152; In re Trevino, 96 B.R. at 613. Mr. Thomas granted a consensual lien to Mrs. Westfall. The lien was not an execution lien, a tax lien, or the result of an attachment. The court concludes that the lien was voluntary within the meaning of § 522(g) and, therefore, concealment is no longer an issue.
The policy reasons for the provisions of § 522(g) are clearly discussed in the Snyder case. Contrary to the debtors' contentions, the section is not punitive. It simply serves the purpose of the Code, i.e., to ensure fair and equal prorata distribution among all unsecured creditors.
In conclusion, it is ORDERED that if the trustee avoids the consensual, voluntary lien of Leoti Westfall which encumbers the debtor's 1988 Volvo truck, the debtors are precluded by operation of § 522(g) from claiming an exemption in the property value which was encumbered by the lien.