In re: Garcia

Even a luxury motor vehicle may be exempted under California’s wildcard exemption, and 11 U.S.C. § 522(f)(1)(B) allows the avoidance of a lien on an exempt vehicle that is a “tool of the debtor’s trade” as long as the lien is a non-possessory and non-purchase-money encumbrance.

Prior to filing for Chapter 7 bankruptcy, Angie Garcia used her Mercedes Benz to secure a loan from the Orange County Credit Union. The balance of the loan was $12,715.50 at petition filing. Meanwhile, the car’s value was only $5,350. Garcia claimed that under Cal. Civ. Proc. § 703.140(b)(5), the car was exempt from her bankruptcy estate. Asserting 11 U.S.C. § 522(f)(1)(B), Garcia sought to avoid the non-possessory, non-purchase-money lien on her exempt property because she claimed the car is a tool of her trade as a real estate agent. The bankruptcy court held that because other sections of the California exemption rules deal with luxury cars explicitly, Garcia could not use California’s “wildcard exemption” to exempt her luxury car. The bankruptcy court also held that § 522(f)(1)(B) could not be used to avoid the lien because § 522(d)(2) referenced motor vehicles, and the legislative history did not suggest that § 522(f) was meant to include lien avoidance on luxury property. The district court reversed and remanded the case to the bankruptcy court because it ruled that the California wildcard exemption’s mention of “any property” should be interpreted literally, as long as the property does not go over the statutory amount. The Ninth Circuit agreed with the district court’s analysis and determined that the language of the California statute combines to allow a debtor to exempt a maximum of $18,350 in “any property,” which literally must include even “fancy cars.” The panel affirmed the remand back to the bankruptcy court to make a factual finding about whether Garcia’s car is actually a tool of her trade. AFFIRMED.