4 ABR 510 UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re:	)
	)	Case No. A96-00906-DMD
JOHN JOUSMA,	)	Chapter 7
	)
Debtor	)
___________________________________	)

MEMORANDUM REGARDING PENDING ISSUES

      A telephonic hearing on the debtor's motion for return of property was held on April 4, 1997. The debtor appeared on his own behalf. Dick Shaffer appeared on behalf of Ketchikan Credit Bureau.

Background
      Ketchikan Credit Bureau (KCB) filed a complaint in state court against John Jousma to collect a medical debt. The case was originally filed in Ketchikan but was subsequently removed to Anchorage. After KCB received a judgment in the sum of $416.49, it served a writ of execution upon the Alaska Department of Revenue, Permanent Fund Division on April 1, 1996.

      Mr. Jousma filed for Chapter 7 protection on October 15, 1996. A copy of his schedule C is attached to this memorandum. On it, Jousma claimed various items of property as exempt, including his Permanent Fund Dividend (PFD), under state statutes. No objections to his claim of exempt property were filed. Jousma notified the State that he had filed bankruptcy in an attempt to stop the State from paying any portion of his PFD to KCB. Despite his efforts, the State deducted $492.35 from Jousma's PFD and remitted a check for this amount to state court in response to KCB's pre-petition levy on or about October 21, 1996. Jousma objected to the levy in state court, claiming the funds were exempt, and hearings were held. The state court overruled Jousma's objections, and KCB received the funds from the levy.

      On February 24, 1997, Jousma filed a pleading in this court entitled "Motion for Order to Require Return of Unlawfully Seized Retained and Concealed Exempt Property." Jousma sought the return of his PFD as well as sanctions against KCB and its attorney, Dick Shaffer, the
     4 ABR 511 original creditor BenGaard Services and the Alaska Permanent Fund Dividend Office. Jousma also filed a confusing pleading entitled "Addendum to Request for Order for Return of Unlawfully Seized, and Retained, and Concealed, Exempt Property." This pleading bears the state court caption and appears to have been filed with the bankruptcy court by Mr. Jousma in error. It does not add anything to his initial motion for bankruptcy purposes.

     On March 12, 1997, Mr. Jousma filed a pleading entitled "Motion to Void Judicial Lien." This pleading, also signed by the trustee, sought to void the judicial lien held by KCB in the debtor's PFD. It was mailed to KCB, but was not sent to its attorney, Dick Shaffer. A copy is attached to this memorandum.

      The purpose of this memorandum is to clarify the issues facing the parties so that they may be addressed appropriately at a future hearing.

Analysis
      The first issue to be addressed by the court concerns the effect of the automatic stay upon KCB's levy against Jousma's PFD. The automatic stay is one of the fundamental protections afforded debtors in bankruptcy proceedings. It arises immediately upon the filing of a petition in accordance with 11 U.S.C. § 362(a) and is very broad in scope. Here, the automatic stay arose on October 15, 1996, when Mr. Jousma filed his bankruptcy petition. The stay prohibited KCB from continuing its collection action against Jousma in any manner; from enforcing any judgment against property of the estate; from performing any act to obtain possession of property of the estate or property from the estate, or exercising control over property of the estate; and from performing any act to create, perfect or enforce a lien against property of the estate. 11 U.S.C. § 362(a).

      Although KCB could have moved for relief from stay pursuant to 11 U.S.C. § 362(d), it did not file such a motion. If KCB's post-petition receipt of Jousma's PFD is found to be a willful violation of the stay, Jousma would be entitled to recover actual damages and, in appropriate circumstances, punitive damages. 11 U.S.C. § 362(h). No specific intent to violate the automatic stay need be shown by Jousma.      4 ABR 512 If a party knows of a bankruptcy, actions taken in violation of the stay are wilful. In re Taylor, 884 F.2d 478, 482 (9th Cir. 1989). Actions taken in violation of the automatic stay are also void. In re Schwartz, 954 F.2d 569 (9th Cir. 1992).

      With reference to Jousma's first motion, which asks for return of the PFD and sanctions against KCB, the court must determine two issues: 1) whether KCB's post-petition receipt of the PFD was a violation of the automatic stay, and 2) if KCB did violate the stay, whether its violation was willful. KCB argues that there was no violation of the automatic stay because the debtor's PFD was not property of his bankruptcy estate. This assertion is incorrect.

      Property of the bankruptcy estate includes all legal and equitable interests of the debtor in property as of the date of the filing of his or her bankruptcy petition. 11 U.S.C. § 541(a)(1). KCB levied upon the debtor's 1996 PFD on April 1, 1997. A PFD is usually not payable until October of a given year. By levying, KCB was entitled to an execution lien against the debtor's PFD. A.S. 09.35.110; Epstein, Debtor-Creditor Law in a Nutshell (4th Ed. 1991), p. 49. The debtor retained a right to excess proceeds of the PFD, as well as a right to exempt portions of the proceeds, under Alaska law. A.S. 09.38.015(10); A.S. 43.23.065. Accordingly, as of October 15, 1996, the date the petition was filed, the debtor retained a legal interest in his PFD. The PFD had not been paid. Since there had been no complete transfer of property prior to the filing of the petition, the PFD became property of the bankruptcy estate subject to the KCB lien. SPS Technologies, Inc. v. Baker Material Handling Corp., 153 B.R. 148 (Bankr. E.D. Pa. 1993); United States v. Whiting Pools, Inc., 462 U.S. 198, 209-210 (1983). KCB's post-petition receipt of estate property and subsequent state court exemption litigation violated the automatic stay.

      Although KCB has violated the automatic stay, the debtor is not entitled to damages unless such violation was willful. To resolve this issue, it must be determined when KCB became aware of the debtor's petition in bankruptcy. The file court reflects that notice of Jousma's bankruptcy was mailed to KCB on October 17, 1996. There is nothing in the record to reflect when KCB received this notice, however. Further, what actions did KCB take once it became aware of Jousma's bankruptcy?      4 ABR 513 What damages has the debtor suffered? Is the debtor entitled to punitive damages under 11 U.S.C. § 362(h)? These are some of the issues that must be addressed at a future hearing.

      The debtor's motion to avoid lien is also pending before the court. The debtor seeks to avoid the execution lien of KCB on his PFD. 11 U.S.C. § 522(f) allows the debtor to avoid a judicial lien that impairs an exemption. Under 11 U.S.C. § 101(36), a "judicial lien" means a lien obtained by a judgment, levy, sequestration or other legal or equitable process or proceeding. Here, KCB's lien was obtained by a judgment and levy. Thus, it is a judicial lien capable of avoidance. But is the PFD totally exempt? For purposes of objections to the debtor's claim of exempt property, it is. KCB did not file an objection to the debtor's claim of exempt property within thirty days of the § 341 meeting. Under Taylor v. Freeland & Kronz, 503 U.S. 638 (1992), the property is exempt. However, a failure to object to the debtor's claim of exempt property does not preclude a judicial lienholder from defending a lien avoidance action. In re Morgan, 149 B.R. 147, 151 (9th Cir. B.A.P. 1993).

      Here, KCB has assumed that the debtor claimed federal exemptions under 11 U.S.C. § 522(d)(5) on his schedule C. Under § 522(d)(5), the debtor can exempt up to $8,300 worth of any property. Jousma scheduled his property as exempt under state, rather than federal, exemption statutes. However, he has the right to amend his schedule of exempt property at any time under Rule 1009(a) of the Federal Rules of Bankruptcy Procedure. Since a PFD is only exempt to the extent of 45% of its value under state law, Jousma cannot claim the entire PFD exempt for lien avoidance purposes until he amends his schedule of exempt property.

Conclusion
      The debtor will be given until MAY 9, 1997, to file an amendment to his claim of exempt property. The debtor shall serve the trustee, Kenneth Battley, as well as KCB's attorney, Dick Shaffer, with copies of his amended claim of exempt property. Mr. Shaffer and Mr. Battley will have until MAY 19, 1997, to file and serve a response to the debtor's motion to avoid lien or his amended claim of exempt property.      4 ABR 514 Upon the filing of responses, the court will schedule such hearings as may be appropriate under the circumstances.

      An order consistent with this memorandum will be entered.

      DATED: April 18, 1997.

BY THE COURT

DONALD MacDONALD IV

United States Bankruptcy Judge