United States Bankruptcy Appellate Panel
                         FOR THE EIGHTH CIRCUIT

                                    ______

                                  No. 09-6023
                                    ______

In re: Larry Weldon Treadwell;        *
Carole Elaine Treadwell,              *
                                      *
      Debtors.                        *
                                      *
Larry Weldon Treadwell; Carole        * Appeal from the United States
Elaine Treadwell,                     * Bankruptcy Court for the Western
                                      * District of Missouri
      Plaintiffs – Appellees,         *
                                      *
            v.                        *
                                      *
Glenstone Lodge, Inc.,                *
                                      *
      Defendant – Appellant.          *
                                    ______

                          Submitted: December 18, 2009
                             Filed: February 1, 2010
                                     ______

Before KRESSEL, Chief Judge, MAHONEY and SALADINO, Bankruptcy
Judges.
                             ______

KRESSEL, Chief Judge.




                                       1 
 
       Glenstone Lodge appeals from the bankruptcy court’s order 1 avoiding its
judicial lien on the debtors’ home and determining the underlying debt to be
dischargeable. We affirm in part and reverse in part.

                                                               BACKGROUND

       Carole and Larry Treadwell are married. Carole runs Memory Travel, a
travel agency. Memory Travel is not incorporated. Larry and Carole consider
themselves to be co-owners of the business because they are married and share
equally in “everything.”

       Carole is a member of the Red Hat Society, Inc., a social organization for
women over the age of fifty. Members are known for their flamboyant red hats
and refer to themselves as “redhatters.” In early 2005, Carole began organizing an
event in Gatlinburg, Tennessee for redhatters. Although the event was not an
official Red Hat Society event, Carole used the corporation’s logos on her
advertisements and in her correspondence.

       In April of 2005, Carole contacted the Gatlinburg Department of Tourism
for assistance in selecting facilities for the event. The Department sent a sales lead
to area hotels, including Glenstone Lodge, Inc. Claudette Geoffrion, the former
director of sales at Glenstone, contacted Carole with a proposal and Carole selected
Glenstone for the redhatter event’s accommodations. For the next several months,
Carole and Claudette frequently exchanged e-mails and talked on the phone.
Together they made arrangements for guest accommodations as well as for
entertainment and activities for the redhatter event, which included a Hawaiian
luau, a fifties-themed sock hop dinner, day trips, and a pajama breakfast.

     In a May 5, 2005 e-mail, Carole told Claudette that each redhatter would
make her reservation through Carole, and that Carole would then pay Glenstone
                                                            
              1
                             Treadwell v. Glenstone (In re Treadwell), 

(Bankr. W.D.
Mo. 2009). 
                                                                   2 
 
“via one check.” In June of 2005, Carole signed an initial contract with Claudette
for 150 rooms for April 20-23, 2006. Carole paid the required $250 deposit. The
contract provided that the first night’s room and tax would be paid in March 2006
when Carole submitted a list of room assignments. The balance was to be paid at
check-in on April 20, 2006. Carole then advertised the Gatlinburg trip to the
redhatters, who responded enthusiastically.

       In October of 2005, Carole realized that she had undercharged the redhatters
for the Gatlinburg event. She knew that she had made a serious mistake in her
estimation of the costs of entertainment, decorations, transportation and other
incidentals. Carole knew she would not be able to satisfy the Glenstone bill for the
event, and all representations she made about the bill from that time on were
knowingly false. She continued to receive some prepayments and deposits from
the redhatters, but used the funds to pay for other trip-related expenses such as the
entertainers.

       In January of 2006, Carole took $10,000 from the redhatters’ deposits to pay
for her mother’s funeral expenses. That same month, Carole and Larry visited
Glenstone and made further arrangements for the event with Claudette and other
staff members.

       Carole did not make the required payment in March when she submitted her
list of room assignments. The bankruptcy court found that Glenstone had, for
some reason, waived the contractual requirement. On April 20, 2006, the
Treadwells and the redhatters arrived. The contract required that the balance due
be paid at check-in, but Carole obtained another waiver. By April 24, 2006, the
last day of the event, Memory Travel had not paid anything to Glenstone except for
the initial $250 deposit. However, Carole collected about $20,000 from the
redhatters during the event and had hoped to collect additional deposits from the
redhatters in anticipation of future events. The Treadwells left on Monday, April
24, 2006 without checking out, paying the outstanding charges, or notifying
Glenstone staff of their departure. The bill was over $60,000.

                                         3 
 
       On Monday, April 24, Glenstone staff contacted Carole about her failure to
pay the bill. Carole responded by email on April 26, stating that she had turned the
bill over to her bookkeeper and that she would pay it after some minor adjustments
were made. Carole did not have a bookkeeper. On April 26, Carole sent a $20,000
check from the Treadwell Family Revocable Living Trust’s bank account by
overnight delivery as partial payment. On April 27, when Glenstone told her they
had not received the check, she wired $15,000 to Glenstone and promised that she
would immediately send a $5,000 check as well. She asked Glenstone not to
deposit the $20,000 check. Glenstone did not receive the $5,000 check so it
attempted to deposit the $20,000 check. However, Carole had issued a stop
payment on the $20,000 check. Carole made no other payments to Glenstone
following the wire transfer.

       Glenstone sued the Treadwells and the Treadwell Family Revocable Living
Trust in state court in Sevier County, Tennessee, asserting: (i) fraud pursuant to §
62-7-107(b) of the Tennessee Code; (ii) violations of the Tennessee Consumer
Protection Act; (iii) conversion; (iv) breach of agreement; (v) fraud, promissory
fraud, mail and wire fraud; and (vi) violation of various provisions of the
Tennessee Code based on the stop payment of the $20,000 check. Glenstone also
named The Red Hat Society, Inc. as a defendant. The Red Hat Society, Inc. filed a
cross-claim against the Treadwells and denied any involvement in the event.
Glenstone dismissed The Red Hat Society, Inc. as a defendant. The Treadwells
and the Treadwell Family Revocable Living Trust failed to answer, and the
Chancery Court for Sevier County, Tennessee awarded treble damages and entered
a default judgment against them in the amount of $153,611.44 plus costs.
Glenstone registered the judgment against the Treadwells in Missouri, thereby
creating a lien against the Treadwells’ residence.

      On August 27, 2008, the Treadwells filed a chapter 7 bankruptcy petition.
On September 18, 2008, the Treadwells initiated this adversary proceeding against
Glenstone, seeking to avoid Glenstone’s judicial lien on their home. Glenstone
answered and counterclaimed against the Treadwells, seeking a determination that

                                         4 
 
the Treadwells’ debt to it was nondischargeable under 11 U.S.C. § 523(a)(2),
(a)(4), and (a)(6).

      The court held a trial on April 22 and 23, 2009. The Treadwells and
Glenstone employees Urcella House and Rita Marshall testified. Claudette
Gioffrion, who would have been the most knowledgeable about Glenstone’s
communications with the Treadwells, did not testify. On June 16, 2009, the court
issued a memorandum opinion and order directing judgment in favor of the
Treadwells. The bankruptcy court found that the judicial lien was avoidable
pursuant to 11 U.S.C. § 522(f)(1) and that the Treadwells’ debt to Glenstone was
not excepted from discharge under 11 U.S.C. § 523(a)(2)(A), (a)(4), or (a)(6).

                             STANDARD OF REVIEW

      We review the bankruptcy court’s findings of fact for clear error and its
conclusions of law de novo. Kaelin v. Bassett (In re Kaelin), 

, 888
(8th Cir. 2002); Bauer v. Iannacone (In re Bauer), 

, 356 (B.A.P. 8th
Cir. 2003). “[A] finding is ‘clearly erroneous’ when although there is evidence to
support it . . . the reviewing court is left with the definite and firm conviction that a
mistake has been committed.” Anderson v. Bessemer City, 

, 573, 

, 

(1985) (quoting U.S. v. U.S. Gypsum Co., 

, 395, 

, 

(1948)).

                                    DISCUSSION

    A. Dischargeability

      A discharge under 11 U.S.C. § 727 does not discharge an individual debtor
for any debt “for money, property, services, or an extension, renewal, or
refinancing of credit, to the extent obtained by . . . false pretenses, a false




                                           5 
 
representation or actual fraud.” 11 U.S.C. § 523(a)(2)(A). 2 In order to prevail
under § 523(a)(2)(A) on the basis of actual fraud, a creditor must prove: “(1) the
debtor made a false representation; (2) at the time the representation was made the
debtor knew it was false; (3) the debtor subjectively intended to deceive the
creditor at the time he made the representation; (4) the creditor justifiably relied
upon the representation; and (5) the creditor was damaged.” Fee v. Eccles (In re
Eccles), 

, 342 (B.A.P. 8th Cir. 2009). The bankruptcy court found
that Glenstone had established all of the elements of actual fraud and false
pretenses as to Carole except for one: justifiable reliance. 3 The Treadwells do not
challenge those findings. As to Larry, the bankruptcy court found that Glenstone
had not established three elements: knowledge of falsity, subjective intent to
deceive or justifiable reliance.

       1. Justifiable Reliance Is a Lower Standard than Reasonable Reliance; There Is
          No Duty to Investigate

       The Supreme Court has held that the standard to be applied to exceptions to
discharge for actual fraud under 11 U.S.C. § 523(a)(2)(A) is “justifiable reliance,”
which is a lower standard that “reasonable reliance,” and entails no duty to
investigate. Field v. Mans, 

, 

(1995). The Supreme
Court examined the history of § 523(a)(2)(A) and concluded that “false pretenses,
a false representation, or actual fraud” are terms of art referring to common law
torts. 

therefore looked to the Restatement (Second) of Torts and
                                                            
              2
             Glenstone also sought a determination of nondischargeability under
11 U.S.C. § 523(a)(4), for fraud or defalcation while acting in a fiduciary capacity,
embezzlement or larceny, and § 523(a)(6), for willful and malicious injury. The
bankruptcy court found that § 523(a)(4) did not apply and that there was no basis
to conclude that Carole had acted with intent to harm under § 523(a)(6). Glenstone
does not challenge those parts of the bankruptcy court’s decision.
 
              3
             The parties do not challenge the bankruptcy court’s treatment of false
pretenses as distinct from actual fraud under § 523(a)(2)(A), but rather dispute only
the court’s findings of fact and application of law regarding whether Glenstone’s
reliance was not justified. 
                                                               6 
 
Prosser’s Law of Torts for guidance on the appropriate standard. Id.; see also
Waring v. Austin (In re Austin), 

(B.A.P. 8th Cir. 2004); Guske v.
Guske (In re Guske), 

(B.A.P. 8th Cir. 2000).

       According to the Restatement (Second) of Torts, “The recipient of a
fraudulent misrepresentation of fact is justified in relying upon its truth, although
he might have ascertained the falsity of the representation had he made an
investigation.” Rest. 2d Torts § 540. An example from the Restatement illustrates
the principle:

      . . . if one induces another to buy a horse by representing it to be
      sound, the purchaser cannot recover even though the horse has but one
      eye, if the horse is shown to the purchaser before he buys it and the
      slightest inspection would have disclosed the defect. On the other
      hand . . . a defect that any experienced horseman would at once
      recognize at first glance may not be patent to a person who has had no
      experience with horses.

Field at 71, 

(quoting Rest. 2d Torts § 541, Comment a). The
Supreme Court also made the following observation, quoting § 545A from the
Restatement:

      Here a contrast between a justifiable and reasonable reliance is clear:
      “Although the plaintiff’s reliance on the misrepresentation must be
      justifiable . . . this does not mean that his conduct must conform to the
      standard of the reasonable man. Justification is a matter of the
      qualities and characteristics of the particular plaintiff, and the
      circumstances of the particular case, rather than of the application of a
      community standard of conduct to all cases.”

Field at 70-71, 

. Although Glenstone’s reliance may not have been
reasonable, it certainly was justifiable under the minimal standard articulated by
the Supreme Court. The bankruptcy court clearly erred in finding that because
Glenstone failed to investigate Memory Travel’s ability to pay for the redhatters
event, its reliance was not justifiable.
                                         7 
 
       The circumstances demonstrate justifiable reliance by Glenstone. The sales
lead came from the Gatlinburg Department of Tourism, and identified the event as
the “Tennessee Redhatters 2006 Spring Event,” which implied some sort of
association with the national organization. For months prior to the event, Carole
worked with Claudette Gioffrion of Glenstone on every detail. They e-mailed
frequently, discussing not only the event but also Carole’s other events, her
mother’s cancer, and then her mother’s passing. As early as May of 2005, Carole
had made clear to Glenstone that she intended to pay with one check and that she
preferred all registrations to go through her. Claudette apparently found that
acceptable. It was the hotel’s policy to accommodate every group as much as
possible. In an e-mail on June 14, 2005, Carole apologized for not getting the
deposit to Claudette on time, but said that she could not pay the deposit “until all
things are settled and we are sure we are ready to go.” Again, Claudette
accommodated her. At some point, Claudette came to view Carole as a friend, as
demonstrated in one of her last e-mails to Carole, dated April 25, 2006: “I still
think you are my friend, will you please contact us???” It was undisputed that
when Glenstone staff asked Carole during the event about payment, she answered
that she intended to pay with a single check after they had finalized the numbers.
Glenstone did in fact make a number of changes to the bill during and immediately
after the event. At all times, it appeared to the parties that the event was going to
be very successful, with nearly all of the rooms booked months in advance. All of
these facts indicate that Glenstone’s reliance was justifiable.

      However, it is true that “The recipient of a fraudulent misrepresentation is
not justified in relying upon its truth if he knows that it is false or its falsity is
obvious to him.” Rest. 2d Torts § 541. We noted that principle when we said:

      Although [the plaintiff] was not required to conduct any investigation
      as to the truth of the Debtor’s representation by signing the consent
      decree that he intended to pay the money, the evidence indicates that
      there were “obvious warning signs” of its falsity, namely, that he told
      her he would not pay it.


                                          8 
 


. This case does not involve obvious warning signs of
falsity, and the bankruptcy court found no evidence that an investigation would
have unearthed proof of the fraud. The bankruptcy court did not find any evidence
that Carole had told Claudette that she did not intend to pay. Rather, the court
found that Carole repeatedly obtained waivers of the usual payment terms.
Repeated requests to postpone payment, without more, do not rise to the level of
obvious warnings sign of falsity.

      There is a “red flag” exception, as noted earlier, for extreme situations such
as the one-eyed horse or where a debtor tells the creditor he will not be able to
repay his debt. Glenstone made a bad business decision in allowing the redhatter
event to proceed without prepayment. Glenstone apparently accepted Carole’s
explanation that she wanted to pay with one check after all issues with the bill had
been resolved. It was not obvious to the Glenstone staff until after the event that
Carole had deceived them about her ability to pay, but of course it would have
been too late at that point for Glenstone to take any preventative measures.

       The bankruptcy court observed that there was no evidence that Glenstone
conducted a background or credit check on Memory Travel or the Treadwells.
Although it held that Glenstone should have conducted an investigation, the
bankruptcy court found no evidence that a background or credit check would have
alerted Glenstone to Memory Travel’s inability to pay. If Glenstone had
investigated Carole and Memory Travel, it might not have uncovered anything
alarming. During at least some of the time prior to the event, Carole appears to
have had a positive cash flow. It was not until January of 2006 that Carole used
event funds to pay for her mother’s funeral, and she continued to receive payments
from the redhatters the weekend of the redhatter event. It was undisputed that
Carole had previously arranged other travel events, and the court found no
evidence that she had engaged in similarly fraudulent activity in the past.

      “The rationale for placing this relatively low burden on the victim of the
misrepresentation is rooted in the common law rule that the victim’s contributory

                                         9 
 
negligence is not a defense to an intentional tort.” Sanford Institution for Savings
v. Gallo, 

, 74 (1st Cir. 1998) (citing Restatement (Second) or Torts §
540, 541 cmt. a (1976)). “In such circumstances, the equities weigh in favor of
giving the benefit of the doubt to the victim, careless as it may have been, and even
though it could have been more diligent and conducted an investigation.” 

court found that Carole intentionally deceived Glenstone. Glenstone
is entitled to have Carole’s debt to it excepted from her discharge despite the fact
that its employees made an enormous mistake by trusting her. We reverse the
bankruptcy court’s determination.

    2. Larry Treadwell’s Debt Is Dischargeable

       We agree with the bankruptcy court’s determination that Larry’s debt to
Glenstone is dischargeable, even though Glenstone proved justifiable reliance.
“On appeal, [. . .] we may affirm the bankruptcy court’s decision on any basis
supported by the record.” Sells v. Porter (In re Porter), 

, 828 (B.A.P.
8th Cir. 2007). The bankruptcy court only made the following findings of fact
regarding Larry: 1) “Larry and Carole Treadwell are equal owners in a travel
agency business known as Memory Travel”; and 2) “As to Larry, although it is
likely that he was also aware that they did not have the money to pay the bill, there
was no actual evidence of that fact. Consequently, although I find that Larry made
implied representations about payment, unlike Carole, I cannot find that his
representations were knowingly false.” The bankruptcy court did not find that
Larry and Carole were partners.

        It is highly unusual to hold a debt nondischargeable under 11 U.S.C. §
523(a)(2) where the debtor is only vicariously liable and has not participated in the
fraud. Glenstone argues that the Eighth Circuit has held that a partnership’s
liability under § 523(a)(2)(A) may be imputed to its agent or partner even in the
absence of evidence that the agent or partner knowingly participated in the fraud.
The case cited by Glenstone is factually and legally inapposite. See Owens v.
Miller (In re Miller), 

(8th Cir. 2002). Miller was the chairman of the

                                         10 
 
board for Andover Securities, a securities brokerage firm licensed by the National
Association of Securities Dealers. While Miller was chairman, Andover employed
Bohling as a vice president. Bohling managed the investments of steel mill retirees
and their spouses. Bohling invested the retirees’ funds in speculative investments,
which ultimately failed, costing the retirees most of their savings. Bohling was
found to have engaged in fraudulent conduct that violated the Securities Exchange
Act. At the time, Miller had indications that Bohling was engaged in fraud, but
had allowed him to continue the practices. Miller knew or should have known of
the securities violations but did nothing to stop him. Miller filed a voluntary
petition, and the retirees filed an adversary proceeding, seeking a determination of
nondischargeability under 11 U.AS.C. § 523(a)(2)(A).

      In the Miller case, the court decided the narrow issue of whether the
bankruptcy court had incorrectly excepted the debt to the retirees from the debtor’s
discharge under § 20(a) of the Securities Exchange Act of 1934, which “renders an
innocent person’s debt nondischargeable when a person over whom the innocent
person exercised control committed actual fraud.” Miller at 429. The court
concluded that the bankruptcy court erred by imputing Bohling’s fraud to Miller
under § 20(a) of the Securities Exchange Act because the Bankruptcy Code does
not contain a specific exception to discharge for securities law violations. The
court discussed the Supreme Court’s Strang decision and concluded that under
Strang, the common law of agency and partnership could be applied to “impute the
fraud of an innocent debtor’s business partner to that debtor and so render his debt
nondischargeable.” 

v. Bradner, 

, 

(1885)). However, the court did not read Strang as providing a basis for
broadening the scope of § 523 to include liability under the Securities Exchange
Act.

     The appellants misread the Miller case, which is not relevant to the
Treadwells except that it concludes that Strang is still good law. In Strang, the
Supreme Court held that a general partner’s fraud may be imputed to all of the


                                         11 
 
members of his firm under agency and partnership principles.                    The Court
concluded:

              Each partner was the agent and representative of the firm with
              reference to all business within the scope of the partnership. And if,
              in the conduct of partnership business, and with reference thereto, one
              partner makes false or fraudulent misrepresentations of fact to the
              injury of innocent persons who deal with him as representing the firm,
              and without notice of any limitations upon his general authority, his
              partners cannot escape pecuniary responsibility therefor upon the
              ground that such misrepresentations were made without their
              knowledge. This is especially so when, as in the case before us, the
              partners, who were not themselves guilty of wrong, received and
              appropriated the fruits of the fraudulent conduct of their associate in
              business.

Strang at 561, 

. Under Strang, partnership liability must be
established first in order to hold the innocent partner’s debt nondischargeable. The
bankruptcy court in this case did not fully analyze the formalities of the Memory
Travel partnership because it was not necessary for its holding, but if it had, the
record would not have supported a finding that Larry was a partner in Carole’s
travel business.

      Memory Travel is not a limited liability partnership or corporate entity.
Therefore, if it is a partnership at all, it would be a general partnership, subject to
Missouri law on partnerships. However, there is no evidence of an actual
partnership. Larry had no authority to control the business, did not believe himself
to be a business partner, had no authority to act on behalf of the business, and
apparently did nothing except help out at events, travel with Carole, and add his
two cents about entertainment and logistics simply because he was there. Carole
forged Larry’s name on the fictitious name registration. His ownership interest
was described by the Treadwells as a marital interest. 4 In other words, because the

                                                            
              4
            A marital relationship is insufficient to establish partnership or agency
in order to hold a debtor liable for his spouse’s fraud for nondischargeability
                                                               12 
 
Treadwells share equally in everything, they considered Larry to be a fifty percent
owner of the business, just as he was a fifty percent owner of the household
furnishings. Carole rarely, if ever, talks to him about their income or expenses. He
testified that he never pays any bills for the household or Memory Travel. Larry’s
name does not appear anywhere on the Glenstone Rooms Contract. Carole’s e-
mails do not suggest that anyone is helping her run the business. There is no
evidence that Larry received a share of the profits, if there ever were any. There is
no evidence that Larry ever represented to Glenstone that he was Carole’s business
partner. The record would not support a finding of partnership or agency.

      There is no factual support for Glenstone’s argument that Miller and Strang
provided a basis for the bankruptcy court to except Larry’s debt from his discharge
under partnership or agency principles. In fact, Eighth Circuit case law indicates
the opposite.       In the Walker case, the Eighth Circuit analyzed the
nondischargeability of an innocent spouse’s debt under § 523(a)(2)(A) and
concluded that “more than the mere existence of an agent-principal relationship is
required to charge the agent’s fraud to the principal. [. . .] If the principal either
knew or should have known of the agent’s fraud, the agent’s fraud will be imputed
to the debtor-principal.” Walker v. Citizens Bank of Maryville, Miss. (In re
Walker), 

, 454 (8th Cir. 1984). The Walker court analyzed the
imputed liability issue as follows:

              Proof that a debtor’s agent obtains money by fraud does not justify the
              denial of a discharge to the debtor, unless it is accompanied by proof
              which demonstrates or justifies an inference that the debtor knew or
              should have known of the fraud. If the debtor was recklessly
              indifferent to the acts of his agent, then the fraud may also be
              attributable to the debtor-principal. [. . .] The debtor who abstains
              from all responsibility for his affairs cannot be held innocent for the
              fraud of his agent if, had he paid minimal attention, he would have
              been alerted to the fraud.

                                                                                                                                                                                                
purposes; rather, there must be an agency or partnership.                                                                                           Accord Allison v.
Roberts (In re Allison), 

, 485-86 (5th Cir. 1992). 
                                                                                             13 
 


omitted). Under Walker, even if there had been evidence that
Memory Travel was a partnership, it still would not be enough to support the
nondischargeability of Larry’s debt. Glenstone would have had to prove that Larry
knew of Carole’s fraud, should have known of Carole’s fraud, or was recklessly
indifferent to Carole’s fraud, and the record does not support that finding. The
bankruptcy correctly concluded that there was no evidence that Larry knew of the
fraud.

        Finally, the appellants argue in their brief that Walker’s knowledge
requirement was limited by Miller: “The Miller Court did not impose any type of
knowledge requirement on the innocent debtor. The Miller court’s absence of any
such discussion and a Fifth Circuit case [. . .] support this conclusion.” However,
the Miller court was merely summarizing the general rule on imputed liability for a
partner’s fraud, while the Walker court actually dealt with the issue of imputed
liability under agency principles and articulated the circumstances under which a
principal’s liability for his agent’s fraud may create a nondischargeable debt. The
Miller court’s silence does not suggest that it was limiting Walker but rather that it
did not reach that issue.

       In conclusion, there is no legal basis for imputing Carole’s fraud to Larry
under either partnership or agency principles. Although Larry and Carole
considered Larry to be an equal owner of Memory Travel, and although he
accompanied Carole on both the initial site visit and the redhatter event, the
evidence overwhelmingly supports the conclusion that he was oblivious to the
operations of the business, merely tagged along with Carole at her request and
helped out at her direction. The record would not support a finding that Larry and
Carole had a partnership or agency relationship, or that Larry knowingly
participated in the fraud or should have known of the fraud. We therefore affirm
the bankruptcy court’s determination that Larry’s debt to Glenstone is
dischargeable.




                                         14 
 
    B. Lien Avoidance

       Section 522(f)(1)(A) provides, “. . . the debtor may avoid the fixing of a lien
on an interest of the debtor in property to the extent that such lien impairs an
exemption to which the debtor would have been entitled . . ., if such lien is—(A) a
judicial lien.” Under § 522(f)(2)(A), a lien is considered to impair an exemption to
the extent that “the sum of—(i) the lien; (ii) all other liens on the property; and (iii)
the amount of the exemption that the debtor could claim if there were no liens on
the property; exceeds the value that the debtor’s interest in the property would have
in the absence of any liens.” The debtors have elected the Missouri state
exemptions. Missouri law provides a $15,000 homestead exemption to be shared
by spouses. Mo. Rev. Stat. § 513.475 (2008). Glenstone’s only argument on
appeal is that the bankruptcy court erred “in finding that the judgment lien created
by the imposition of a judgment as to a non-dischargeable debt would not become
a lien on the debtors’ residence as a new post-petition lien and in avoiding the
existing judgment lien of Glenstone Lodge beyond $15,000.” Glenstone’s
argument regarding “a new post-petition lien” is simply incorrect. There is no
“new post-petition lien.” There is one prepetition lien, which is either avoidable or
it is not. Glenstone’s argument mischaracterizes the court’s findings on lien
avoidance, which were limited to the following:

      Although the parties disputed what effect, if any, a finding of
      nondischargeability would have on the lien avoidance issue,
      Glenstone Lodge has agreed that, due to the value of the Treadwells’
      home and the amount of the secured debt, its judgment lien would be
      avoidable if the debt were found to be dischargeable. Consequently,
      since I have found that the debt is dischargeable, Glenstone Lodge’s
      judicial lien on the Treadwells’ home will be avoided pursuant to §
      522(f)(1).

. The dischargeability of a loan is irrelevant to the
avoidance of a lien under § 522(f)(1) and § 522(f)(2)(A). In order to determine
whether a lien is avoidable pursuant to § 522(f)(1), a bankruptcy court must apply
the statutory formula provided in § 522(f)(2)(A). “Section 522(f)(2)(A) is a

                                           15 
 
congressionally mandated bright line formula for determining how to calculate the
extent to which a judicial lien impairs an exemption.” Kolich v. Antioch Laurel
Veterinary Hosp., Inc. (In re Kolich), 

, 206 (B.A.P. 8th Cir.2002),
aff’d 

(8th Cir. 2003). The dischargeability of the underlying debt is
therefore not a basis for avoiding or not avoiding the lien under § 522(f)(2)(A).
We affirm the bankruptcy court’s avoidance of Glenstone’s lien.

                                 CONCLUSION

      For the reasons stated, we reverse the bankruptcy court’s determination that
Carole Treadwell’s debt to Glenstone was dischargeable, affirm the bankruptcy
court’s determination that Larry Treadwell’s debt to Glenstone was dischargeable,
and affirm the bankruptcy court’s avoidance of Glenstone’s lien.




                                        16