MEMORANDUM OPINION

RICHARD D. TAYLOR, UNITED STATES BANKRUPTCY JUDGE

Before the court is a Motion for Avoidance of Lien of Department of Workforce Services ("Motion") filed by the debtor, Tilda Marie Chambers Leaks ("debtor"), on April 7, 2016. Jack W. Gooding, the Chapter 13 Standing Trustee, filed his Trustee's Response to Motion for Avoidance of Lien of Department of Workforce Services as did Daryl E. Bassett, the Director ("Director") of the Arkansas Department of Workforce Services ("Workforce Services"), by his Creditor's Response to Debtor's Motion to Avoid Lien of the Arkansas Department of Workforce Services (collectively, the "Responses"). The Responses sought to deny the debtor's requested relief. The court heard the Motion and Responses on May 24, 2016, and took the matter under advisement. For the reasons stated herein, the relief requested in the Motion is granted.

I. Jurisdiction

This court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (K), and (O). The following opinion constitutes findings of fact and conclusions of law in accordance with Federal Rules of Bankruptcy Procedure 7052 and 9014.

II. Findings of Fact

The debtor filed for Chapter 13 relief on November 13, 2015. She claimed all of her real and personal property as exempt. In her Motion, the debtor describes a "pre-petition judgment" against her obtained by Workforce Services in the amount of $2314.98. (Mot. for Avoidance of Lien of Dept. of Workforce Serv. ¶ 3, Apr. 7, 2016, ECF No. 35.) The debtor seeks to avoid the "above-described judicial lien" pursuant to 11 U.S.C. § 522(f) as one impairing her exemptions. (Mot. ¶ 6, ECF No. 35.) Although described in the Motion as a "pre-petition judgment," the lien is actually represented not by a traditional court-generated judgment but rather by two Certificates of Overpayment of Unemployment Insurance Benefits Levied by the Department of Workforce Services Act (the "Certificate" or "Certificates"). (Creditor Exs. 1, 2.) The underlying indebtedness represents the debtor's receipt of unemployment compensation benefits to which she was not entitled. The Certificates are dated March 5, 2012, and February 27, 2015. (Creditor Exs. 1, 2.) The clerk of the circuit court recorded them on March 6, 2012, and March 2, 2015, respectively. (Creditor Exs. 1, 2.)

The debtor testified that prior to the issuance and recording of the Certificates, in November 2011, she received a letter from Workforce Services concerning overpayment due to her alleged failure to accurately report her income. The debtor recalled that she appealed that determination and engaged in a hearing — possibly by phone. The debtor received a similar letter in 2012.

Each Certificate is styled "In the Circuit Court of Calhoun County, Arkansas" and lists the Director as "Plaintiff" and the debtor as "Defendant." (Creditor Exs. 1, 2.) In substance, each Certificate is a certification by the Director that a "final notification was made to the defendant of the assessment of delinquent overpayments levied by the Department of Workforce Services Act, past due and unpaid by said defendant, and on the same date, a copy of said overpayment was delivered to said defendant." (Creditor Exs. 1, 2.) The Director further certified "that all appeal rights have been exhausted pursuant to A.C.A. § 11-10-532(d), and [he] now certif[ies] to you, as Clerk of the said Circuit Court, the amount of said delinquent overpayment due by the said defendant is [a sum certain] plus court costs." (Creditor Exs. 1, 2.) Thereafter, the Certificates provide a "Notice of Lien" that, pursuant to Arkansas Code Annotated § 11-10-532(d), a lien is created "upon all real and personal property owned by the above-named defendant to secure payment of the amount shown above." (Creditor Exs. 1, 2.) At the bottom of each Certificate is a "Note to Clerk" instructing the clerk to file the Certificate "in the records of the Circuit Court for judgments and decrees under the procedure prescribed for filing transcripts of judgment by Arkansas Code Annotated § 16-19-1011, as provided by Arkansas Code Annotated § 11-10-532(d), as amended." (Creditor Exs. 1, 2.)

III. Discussion

A. Case Law

The debtor seeks to characterize the Certificates as judicial liens that are amenable to avoidance under section 522(f). Workforce Services contends that its liens are statutory liens and, as such, are not avoidable. The Chapter 13 Standing Trustee concurs. All parties concede that the only issue before this court is whether the Certificates represent avoidable judicial liens or unavoidable statutory liens. An analysis of the facts and appropriate law compels the conclusion that the Certificates represent avoidable judicial liens as they do not "aris[e] solely by force of a statute on specified circumstances or conditions," but rather as a result of "other legal or equitable process or proceeding." 11 U.S.C. § 101(53), (36) (2016).

Section 522(f)(1) of the Code provides:

11 U.S.C. § 522(f) (2016).

The Code defines a judicial lien as one "obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." 11 U.S.C. § 101(36). Conversely, a statutory lien is one "arising solely by force of a statute on specified circumstances or conditions, ... but does not include security interest or judicial lien, whether or not such interest or lien is provided by or is dependent on a statute and whether or not such interest or lien is made fully effective by statute." 11 U.S.C. § 101(53).

In support of her argument, the debtor relies principally on Arkansas Code Annotated § 11-10-532(d)(3), which provides: "[a]fter entry by the circuit clerk, the [C]ertificate of overpayment shall have the force of a judgment of the circuit court and shall bear interest at the rate of ten percent (10%) annually." ARK. CODE ANN. § 11-10-532(d)(3) (2016) (emphasis added). Reliance on that singular provision, however, is not sufficient to conclusively characterize the Certificate as a judicial lien.

The Third Circuit reached that conclusion in In re Schick, 418 F.3d 321 (3rd Cir.2005). Schick presented the court with the issue of whether a lien held by the New Jersey Motor Vehicles Commission was a statutory or judicial lien for purposes of lien avoidance under section 522(f). 418 F.3d at 322. The New Jersey statutory scheme that imposed the lien contained a provision similar to the one in Arkansas whereby the docketing of the certificate would have the same force and effect as a civil judgment and would be amenable to collection accordingly. Schick, 418 F.3d at 325. In analyzing "whether it arises solely by force of statute, or whether it results from some type of judicial process or proceeding," the Third Circuit analogized to an earlier decision involving unpaid water bills. Id. at 324-25. Discussing that case, where the debtor argued that the lien statute created a judicial lien, the Schick court stated:

Id. at 325-26 (citations omitted).

The Schick court persuasively concluded:

Id. at 328 (citations omitted) (emphasis added).

A recent Wisconsin case represents a natural and logical extension of the Schick analysis. In Beck, the Wisconsin Department of Workforce Development ("Workforce Department") sought to reclaim an overpayment of unemployment benefits due to the debtor's misrepresentations concerning entitlement. In re Beck, No. 15-29541-svk, 2016 WL 489892, at *1 (Bankr.E.D.Wis. Feb. 5, 2016). The debtor sought to avoid the department's secured claim as a judicial lien that impaired the debtor's exemptions pursuant to section 522(f). Id.

In Beck, the court distinguished between statutory liens and judicial liens created by Wisconsin statutes. Some statutes "create a lien by their very texts"; thus, "[t]he statutes themselves create the liens automatically, without any judicial, legal or other process," which is "the essence of a statutory lien." Id. at *3. In contrast, the Workforce Department's warrant (similar to the Certificates) "involve[s] process, including an administrative determination of whether the cause of the overpayment was the Debtor's false statements or misrepresentations." Id. at *3. In Beck, the process involved: an initial determination by the Workforce Department; a copy of the determination being sent to the debtor; the ability of the debtor to dispute the obligation; the opportunity for a hearing conducted by an appeal tribunal; the ability of the appeal tribunal to affirm, reverse, or modify the determination; the ability to seek review of the appeal tribunal's decision; and the opportunity to seek judicial review in circuit court. Id. at *1. Once that process concluded, the Workforce Department could issue a warrant to the circuit court clerk, which warrant would be filed of record and "considered in all respects as a final judgment constituting a perfected lien" on the debtor's real and personal property. Id. at *2. The court concluded that "the existence of [] procedures in the statutory scheme support[ed] the conclusion that [the Workforce Department's] lien against the Debtor [wa]s a judicial lien, not a statutory lien." Id. at *3.

Contrary to the Beck decision and distinguishable from the present facts, the court in Braxton declared an agency's lien to be a statutory lien incapable of avoidance. Braxton v. Bureau of Unemp't Comp. Benefits and Allowances (In re Braxton), 224 B.R. 564 (Bankr.W.D.Pa. 1998).

224 B.R. at 569.

In Braxton, the court emphasized court participation. In isolation, and uniquely premised on the truncated process in the Pennsylvania statutes in question, Braxton is distinguishable both under Beck and under the facts presently before this court. As pointed out in Beck, the Code's definition of a judicial lien is not so restrictive. While the definition specifically references a lien "obtained by judgment" with attendant levy and sequestration, it equally includes a lien obtained by "other legal or equitable process or proceeding." 11 U.S.C. § 101(36). The Beck court found this language to be dispositive, and this court concurs.

In Smith, another court dealt with a statutory scheme involving workers' compensation insurance. Smith v. Botzet (In re Smith), 401 B.R. 674 (Bankr.E.D.Pa. 2009). Relying on Schick, the court concluded that a statutory scheme that allowed the simple filing of a certified copy of a claim petition to automatically create a judgment compelled the conclusion that it was a statutory as opposed to judicial lien. Id. at 683-85.

Id. at 683. The procedure in Pennsylvania did allow for administrative hearings thereafter to revise, reduce, or increase the claimed amount. Id. at 684. The Smith court went on to recognize possible distinctions1 and left some room for a contrary result in referencing a New Jersey statute, stating:

Id. at 686 (citations omitted) (emphasis added).

In considering a similar avoidance request involving a workers' compensation lien, the court in Newton observed:

In re Newton, 402 B.R. 771, 774 (Bankr. W.D.Ky.2009).

In sum, while the certificate in Newton contained plaintiff and defendant terminology and the debtor had the right to discovery, an evidentiary hearing, and the potential for an adjudication by an Administrative Law Judge, that subsequent judicial process did not "transform th[e] lien into ... a judicial lien." Id. "While the filing of a claim may have started a judicial process, the creation and recordation of the liens originated from a purely statutory standpoint.... No judicial action was needed before the lien could be recorded, and thus, this is a statutory liens (sic) and not a judicial lien subject to lien avoidance." Id. The Arkansas statutory scheme, however, compels a different result — one more in line with the reasoning in Beck.

B. Arkansas Statutes

An analysis of the Arkansas statutory scheme requires an initial focus on the definitions of the two types of liens concerned. Specifically, the Bankruptcy Code defines a judicial lien as a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." 11 U.S.C. § 101(36) (emphasis added). The definition is expansive; it does not contemplate solely court judgments. While the term "judicial lien" unquestionably includes liens obtained by traditional means, i.e., a judgment, it also and equally includes liens obtained by "other legal or equitable process or proceeding." To rely exclusively on the judgment of a court would be to ignore this second type of specific and defined judicial lien. The Certificates are clearly not judgments entered by a court after traditional litigation. Accordingly, the court's analysis turns to whether the lien represented by the Certificates is one resulting from an "other legal or equitable process or proceeding" or a statutory lien as defined by the Code.

The Code defines a statutory lien as one "arising solely by force of a statute on specified circumstances or conditions [.]" 11 U.S.C. § 101(53) (emphasis added). Simply stated, does the lien arise upon the mere occurrence of specific events. A statutory lien is limited and quantified; if certain events or circumstances occur as articulated in the statute, a lien arises that is statutory in nature and unavoidable. Conversely, if the statutory scheme contemplates a legal process or proceeding that could, or could not, result in a judgment or a lien enforceable as a judgment, then it is judicial and avoidable. The pertinent Arkansas statutes conclusively demonstrate that the Certificates and attendant liens result from a legal process or proceeding and do not arise upon the mere occurrence of specific events.

The principle Arkansas statute concerning Workforce Services's lien is section 11-10532, which states:

ARK. CODE ANN. § 11-10-532 (emphasis added).

Accordingly, the procedure permitting the Director to initiate the collection process through the issuance of a certificate for filing by the circuit clerk, which has the full force of a judgment at law for which collection may issue, commences only after the overpayment determination "becomes final pursuant to § 11-10-527[.]" ARK. CODE ANN. § 11-10-532(d)(1), (3) (emphasis added). Thus, processes and proceedings precede the finality represented by the Certificate. This analysis is confirmed in the very wording of the Certificate where the Director "further certif[ies] that all appeal rights have been exhausted pursuant to A.C.A. § 11-10-532(d)[.]" (Creditor Exs. 1, 2.)

This process, made conclusive by section 527, is outlined in section 524, which provides:

ARK. CODE ANN. § 11-10-524 (2016).

Additional statutory provisions detail the creation of a board of review to hear and decide appeal claims, including a full-time and salaried chairman. ARK. CODE ANN. § 11-10-523(a), (b) (2016). An examiner may be employed. ARK. CODE ANN. § 11-10-523(d). Hearings may be conducted. ARK. CODE ANN. § 11-10-523(d)(1). Matters can be heard by an appeals tribunal subject to a full board review. ARK. CODE ANN. § 11-10-523(g). The board may rely on the record or may direct the taking of additional evidence and then "may affirm, modify, reverse, dismiss, or remand the case." ARK. CODE ANN. § 11-10-525(c)(1) (2016). Thereafter, a party may request judicial review. ARK. CODE ANN. § 11-10-525(e), 529 (2016). While the board and appeal tribunal are not bound by common law or statutory rules of evidence, "any hearing or appeal before the tribunals shall be conducted in such manner as to ascertain the substantial rights of the parties." ARK. CODE ANN. § 11-10-526(a)(1) (2016). Further, "the board may adopt reasonable regulations governing the manner of filing appeals, the conduct of hearings, and other appellate procedures, consistent with this chapter." ARK. CODE ANN. § 11-10-526(a)(2). Witnesses may be subpoenaed, and a record is kept. ARK. CODE ANN. § 11-10-526(e), (f); ARK. CODE ANN. § 11-10-315, 316 (2016).

The decision of the board and the principles of law relied upon, have precedential effect. Specifically:

ARK. CODE ANN. § 11-10-528 (2016).

Finally, the parties can appeal the decision of the board of review to the Arkansas Court of Appeals, which "proceedings shall be heard in a summary manner and shall be given precedence over all other civil cases except cases arising under the Workers' Compensation Law, § 11-9-101 et seq." ARK. CODE ANN. § 11-10-529(a)(1)(A), (d)(1). Plainly, the Arkansas Code provides for an extensive process that determines or adjudicates the existence and conclusive validity of the liability amount initially determined and asserted by the Director. This process is completed prior to the issuance of the Certificate on which the lien is predicated. Accordingly, the liens represented by the Certificates are the result of a process or proceeding within the meaning of the Code's definition of a judicial lien and as such are avoidable under section 522(f).

IV. Conclusion

For the reasons stated herein, the relief requested in the Motion is granted. A separate judgment will be entered to this effect.

IT IS SO ORDERED.