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            In O’Sullivan v CRP Holdings, A-1, LLC, 914 F.3d 1162 (8th Cir. 2019), the Eighth Circuit held that a creditor’s docketed judgment created a judicial lien on the debtor’s interest in his exempt homestead, even though it was not a lien under Missouri law and was not presently enforceable against the property; as such, the judicial lien could be avoided under 11 U.S.C. § 522(f). The debtor and his spouse owned their home in a tenancy by the entireties. Upon filing a petition for relief, the debtor claimed his interest in the home as exempt. Under Missouri law, docketing a judgment, which is against only one spouse, does not create a lien on property held in a tenancy by the entireties. Simply put, the creditor did not have a lien on the exempt property under the definition of “lien” provided by Missouri law.

            The Eighth Circuit held that the Bankruptcy Code’s definition of “judicial lien” is broader than the definition of “lien” under Missouri law. In affirming the Bankruptcy Appellate Panel, the Eighth Circuit held that federal law distinguished between “existent but presently unenforceable liens,” which are still “judicial liens” under the Bankruptcy Code, and “nonexistent liens,” which are not.  The recording of the judgment created a cloud on the debtor’s title and could potentially become a lien under Missouri law if the debtor’s spouse died. That constituted a “charge against or interest in property,” which is included in the Bankruptcy Code’s definition of “judicial lien.”  The judicial lien impaired the debtor’s exemption and therefore could be avoided under section 522(f).