OPINION
RODNEY BERNARD, Jr., Bankruptcy Judge.
Procedural Development of Case
On September 11, 1983 the debtor in this Chapter 7 case, Joseph Delma Racca, filed a petition to amend Schedule B-4 of his original petition, filed April 11, 1983. The debtor seeks by his “petition to amend”, to claim certain additional property, not listed in his original Schedule B-4 as exempt. The trustee has filed an objection to the amendment, the basis of which is, in part, that the amendment is untimely in that it fails to comply with the provisions of Rule 1007(c). It is the trustee’s position that Rule 1007(c) would require that the debtor first obtain an order of court extending the time for filing the necessary schedules and pleadings once the fifteen (15) day deadline contained therein has passed. Additionally, a creditor, O’Brien Flying Service, Inc., has filed an objection to the amended Schedule B-4. The hearing instanta was provoked by the debtor’s motion to have the trustee ruled into court to show cause why the debtor’s amended Schedule B-4 should not be allowed to stand. Subsequently these matters and issues were joined and a hearing was held before this court on November 9, 1983. This first hearing did not result in a final determination and instead the matter was continued until December 1, 1983 in order to allow the debtor time to prepare and to file a proper accounting of certain contested issues which surfaced during the hearing. On December 1, 1983 a second hearing was held before this court at which time the respective parties presented additional evidence, testimony and argument. Thé matter was then submitted for determination and was taken under advisement.
After having reviewed the matter in its entirety and after having engaged in a good deal of research as to the legal issues herein presented, it is the considered determination of this court that the debtor’s claim to additional exemptions will not be allowed for reasons as set out more specifically below.
Findings of Fact
What surfaces from the testimony and evidence is that for some time prior to filing his petition for Chapter 7 relief, the debtor, Mr. Racca, was engaged in rather substantial farming operations. Indeed he does not dispute, that at least until the early part of 1982, he earned his living as a farmer. However, at some point during 1982, for reasons not here at issue, the farming operations began to flounder and his crop for that year was ultimately seized by certain of his creditors.
Also, not contested, is the fact that prior to going out of the farming business, Mr. Racca was the title-record owner of a certain sixty-foot boat, registration number 8608-A7, which boat forms the subject matter of the present controversy. The objectors have throughout these proceedings referred to this boat, (which Mr. Racca now asserts is an exempt ‘tool of his trade’), as a ‘pleasure boat’ or a ‘house
boat’; and in fact the debtor does not dispute that such was the boat’s original function and purpose. Mr. Racca, however, contends that when it became apparent that he would no longer be able to earn his living as a farmer, he at that time proceeded to have the subject boat fitted with the necessary equipment which would allow him to utilize it for purposes of commercial shrimping. It was further his testimony that for at least several months prior to filing for bankruptcy, he was in fact engaged in the business of commercial shrimping. Thus, it is Mr. Racea’s contention that his ‘houseboat’ is no longer a ‘houseboat’ but is instead a commercial shrimping vessel, which should be exempted as a ‘tool of his trade’.
As to why he did not originally list the boat as an exempt asset, Mr. Racca gives, by way of explanation, the following: The boat, at the time of filing, was encumbered with a chattel mortgage in favor of Mr. T.R. Miller, (debtor’s nephew), and that the mortgage equaled or exceeded any equity the debtor otherwise had in this asset. The trustee however has since set aside the above-described chattel mortgage due to the fact that it was never properly recorded thus constituting an unperfected security interest defeasible in bankruptcy which the trustee now seeks to preserve for the benefit of the estate,
11 U.S.C.A. §§ 5)), 551.
As the court appreciates the debtor’s present position he contends that since the boat is now freed of the encumbrance and since he uses the boat to earn a living, he should now be allowed to exempt this asset as a ‘tool of his trade’
11 U.S.C.A. § 522; LSA R.S. 13:3881.
The objectors for their part contend variously and alternatively that: (1) The boat was and remains a houseboat or pleasure craft and as such does not qualify as an exempt ‘tool of the trade’. (2) The debtor at no time engaged in the business of commercial shrimping as a serious ‘for profit’ enterprise. (3) Even if the debtor had at one time engaged in commercial shrimping, he was nevertheless not doing so at the time of filing nor does he have any serious or realistic intent to resume those activities in the future. And (4), procedurally, the petition to amend comes too late and if allowed will prejudice the estate.
Discussion and Conclusions of Law
As a threshold observation the court notes that the Code provides that under certain defined circumstances the debtor will be allowed to claim his exemptions on property recovered by the trustee.
Specifically
11 U.S.C.A. § 522(g)
provides as follows:
(g) Notwithstanding sections
550
and 551 of this title [11 USCS §§ 550 and 551], the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title [11 USCS § 510(c)(2), 542, 543, 550, 551, or 553], to the extent that the debtor could have exemptéd such property under subsection (b) of this section if such property had not been transferred, if—
(1)(A) such transfer was not a voluntary transfer of such property by the debt- or; and
(B) the debtor did not conceal such property; or
(2) the debtor could have avoided such transfer under subsection
(f)(2)
of this section.
A careful perusal of the above provision reveals that in addition to many other conditions, the debtor’s ability to utilize
522(g)
is contingent upon his ability to qualify for the exemption under the provisions of
522(b).
That section in turn contains a provision for what has come to be known as “state opt out” 522(b)(1).
The Louisi
ana Legislature has chosen to take advantage of the ‘opt-out’ provision, by providing the state’s own exemption statute and prohibiting the use of the exemptions provided in
11 U.S. C.A. § 522(d), LSA R.S.
13:3881(B).
The net result of this rather
intricate series of cross references is to, the effect that the reference to
522(b)
contained in
522(g)
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OPINION
RODNEY BERNARD, Jr., Bankruptcy Judge.
Procedural Development of Case
On September 11, 1983 the debtor in this Chapter 7 case, Joseph Delma Racca, filed a petition to amend Schedule B-4 of his original petition, filed April 11, 1983. The debtor seeks by his “petition to amend”, to claim certain additional property, not listed in his original Schedule B-4 as exempt. The trustee has filed an objection to the amendment, the basis of which is, in part, that the amendment is untimely in that it fails to comply with the provisions of Rule 1007(c). It is the trustee’s position that Rule 1007(c) would require that the debtor first obtain an order of court extending the time for filing the necessary schedules and pleadings once the fifteen (15) day deadline contained therein has passed. Additionally, a creditor, O’Brien Flying Service, Inc., has filed an objection to the amended Schedule B-4. The hearing instanta was provoked by the debtor’s motion to have the trustee ruled into court to show cause why the debtor’s amended Schedule B-4 should not be allowed to stand. Subsequently these matters and issues were joined and a hearing was held before this court on November 9, 1983. This first hearing did not result in a final determination and instead the matter was continued until December 1, 1983 in order to allow the debtor time to prepare and to file a proper accounting of certain contested issues which surfaced during the hearing. On December 1, 1983 a second hearing was held before this court at which time the respective parties presented additional evidence, testimony and argument. Thé matter was then submitted for determination and was taken under advisement.
After having reviewed the matter in its entirety and after having engaged in a good deal of research as to the legal issues herein presented, it is the considered determination of this court that the debtor’s claim to additional exemptions will not be allowed for reasons as set out more specifically below.
Findings of Fact
What surfaces from the testimony and evidence is that for some time prior to filing his petition for Chapter 7 relief, the debtor, Mr. Racca, was engaged in rather substantial farming operations. Indeed he does not dispute, that at least until the early part of 1982, he earned his living as a farmer. However, at some point during 1982, for reasons not here at issue, the farming operations began to flounder and his crop for that year was ultimately seized by certain of his creditors.
Also, not contested, is the fact that prior to going out of the farming business, Mr. Racca was the title-record owner of a certain sixty-foot boat, registration number 8608-A7, which boat forms the subject matter of the present controversy. The objectors have throughout these proceedings referred to this boat, (which Mr. Racca now asserts is an exempt ‘tool of his trade’), as a ‘pleasure boat’ or a ‘house
boat’; and in fact the debtor does not dispute that such was the boat’s original function and purpose. Mr. Racca, however, contends that when it became apparent that he would no longer be able to earn his living as a farmer, he at that time proceeded to have the subject boat fitted with the necessary equipment which would allow him to utilize it for purposes of commercial shrimping. It was further his testimony that for at least several months prior to filing for bankruptcy, he was in fact engaged in the business of commercial shrimping. Thus, it is Mr. Racea’s contention that his ‘houseboat’ is no longer a ‘houseboat’ but is instead a commercial shrimping vessel, which should be exempted as a ‘tool of his trade’.
As to why he did not originally list the boat as an exempt asset, Mr. Racca gives, by way of explanation, the following: The boat, at the time of filing, was encumbered with a chattel mortgage in favor of Mr. T.R. Miller, (debtor’s nephew), and that the mortgage equaled or exceeded any equity the debtor otherwise had in this asset. The trustee however has since set aside the above-described chattel mortgage due to the fact that it was never properly recorded thus constituting an unperfected security interest defeasible in bankruptcy which the trustee now seeks to preserve for the benefit of the estate,
11 U.S.C.A. §§ 5)), 551.
As the court appreciates the debtor’s present position he contends that since the boat is now freed of the encumbrance and since he uses the boat to earn a living, he should now be allowed to exempt this asset as a ‘tool of his trade’
11 U.S.C.A. § 522; LSA R.S. 13:3881.
The objectors for their part contend variously and alternatively that: (1) The boat was and remains a houseboat or pleasure craft and as such does not qualify as an exempt ‘tool of the trade’. (2) The debtor at no time engaged in the business of commercial shrimping as a serious ‘for profit’ enterprise. (3) Even if the debtor had at one time engaged in commercial shrimping, he was nevertheless not doing so at the time of filing nor does he have any serious or realistic intent to resume those activities in the future. And (4), procedurally, the petition to amend comes too late and if allowed will prejudice the estate.
Discussion and Conclusions of Law
As a threshold observation the court notes that the Code provides that under certain defined circumstances the debtor will be allowed to claim his exemptions on property recovered by the trustee.
Specifically
11 U.S.C.A. § 522(g)
provides as follows:
(g) Notwithstanding sections
550
and 551 of this title [11 USCS §§ 550 and 551], the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title [11 USCS § 510(c)(2), 542, 543, 550, 551, or 553], to the extent that the debtor could have exemptéd such property under subsection (b) of this section if such property had not been transferred, if—
(1)(A) such transfer was not a voluntary transfer of such property by the debt- or; and
(B) the debtor did not conceal such property; or
(2) the debtor could have avoided such transfer under subsection
(f)(2)
of this section.
A careful perusal of the above provision reveals that in addition to many other conditions, the debtor’s ability to utilize
522(g)
is contingent upon his ability to qualify for the exemption under the provisions of
522(b).
That section in turn contains a provision for what has come to be known as “state opt out” 522(b)(1).
The Louisi
ana Legislature has chosen to take advantage of the ‘opt-out’ provision, by providing the state’s own exemption statute and prohibiting the use of the exemptions provided in
11 U.S. C.A. § 522(d), LSA R.S.
13:3881(B).
The net result of this rather
intricate series of cross references is to, the effect that the reference to
522(b)
contained in
522(g)
is, (when dealing with the Louisiana debtor, as here), a reference to state law. Accordingly, it is to Louisiana’s general exemption statute,
R.S. 13:3881,
and to the case law interpreting that statute that we must initially turn in assessing the exemptability vel non, of the boat in question.
At the time debtor filed his petition in bankruptcy
R.S. 13:3881
read, in pertinent part, as follows:
A. The following income or property of a debtor is exempt from seizure under any writ, mandate, or process whatsoever:
(2) The tools, instruments and books necessary to the exercise of a trade, calling or profession by which he earns his livelihood,
in whole or in part ...
(emphasis added)
However by
Acts 1983, No. 108 § 1
the entire section (A)(2) was changed and no longer contains the phrase “in whole or in part”. Whether the dropping of that phrase represents a substantive change or is merely stylistic, will have to await future interpretation. The court feels, for reasons which will become apparent, that it is unnecessary to reach that issue for purposes of determining the outcome of the ease at bar.
Pretermitting the effect of the chattel mortgage, Louisiana courts have as a general proposition interpreted
R.S. 13:3881
quite liberally in favor of the debtor,
Bank of Louisiana v. Nash,
360 So.2d 259 (La.App. 4th Cir.1978). The Louisiana courts have consistently held that even large pieces of equipment, such as the boat in question, fall within the protective provisions of
R.S. 13:3881,
without any limitation as to their value,
Cox v. Smith,
275 So.2d 459 (La.App. 2d Cir.1973); [compare
11 U.S.C. § 522(d)(6),
which puts a $750 limit on such items]. Nor is it necessary for the debtor to show that he earns all or even a substantial portion of his income
through the use of the item in question. He need only show that he earns his livelihood “in whole or in part” through the use of the ‘tool’ to be eligible for the exemption,
Cox
(supra);
Nash
(supra),
Matter of Hanks,
11 B.R. 706, (U.S.D.C.W.D.La. 1977). Even where the “tool” has fallen into temporary disuse, as long as the debt- or can demonstrate a present and reasonable intent to use it to earn his living in the future, he will not be precluded on this basis alone from claiming the exemption,
Nash
(supra);
Skelley v. Accounts Supervision Co.,
53 So.2d 520 (La.App.2d Cir.1951);
Lafourche Ice and Shrimp Co. v. Gilbeau,
185 So. 310 (La.App. 1st Cir.1938).
Nevertheless, despite the liberality of the above requirements, the debtor’s mere characterization of an item as a “tool of his trade” is not enough. His claim to the exemption must be made in good faith and be supported by credible testimony and/or evidence,
Fallin v. J.J. Stovall & Sons,
141 La. 220, 72 So. 911 (La.1917);
Bank of Louisiana v. Nash,
360 So.2d 259 (La.App. 4th Cir.1978). This is especially true in a case, such as the one presently before the court, where the debtor is not currently using the item to earn his living, but claims that he intends to use it for such purposes in the future. In such a case the debtor must provide this court with more than his own self-serving declaration of intent before being allowed to deprive his creditors of such a valuable asset. Indeed, he must be able to demonstrate not only that his stated intent is made in good faith, but also that it is both reasonable and realistic,
Nash
(supra). This, the court feels Mr. Racca has clearly failed to do.
Mr. Racca’s testimony regarding the details of his shrimping operation can be characterized, at best, as sketchy and unsatisfactory. He failed to provide the court with a reasonable explanation of his income and expenses with regard to these operations; this in spite of the fact that he was granted a continuance and ordered by the court to present such an accounting. The only comprehensive income figure he could supply was the $12,000 figure; which by his own admission, he “guessed” at in order to file his tax return. Nor does this court find his explanation as to why he “temporarily” ceased shrimping operations credible, in light of his poor financial condition. In all, this court finds that Mr. Racca has failed to prove that the boat in question is necessary to his livelihood and would deny his claim to the exemption on that basis alone.
Effect of the Chattel Mortgage
Even if this court could find that the subject boat, under the circumstances, fell within the intendment of
R.S. 13:3881,
there remains a question concerning the effect of the chattel mortgage.
R.S. 13:3881
must be read ‘in pari materia’ with
R.S. 13:3885.
The latter in effect provides that where a debtor has granted a chattel mortgage over his property he will not be allowed to take advantage of the exemption provisions of
13:3881,
at least to the extent of the mortgage.
Further it must be kept in mind that the trustee has not attacked the validity of the mortgage but has merely used his power as trustee to avoid a certain unprotected security interest, 11 U.S.C. § 544. Both as a matter of Louisiana law and as a matter of bankruptcy law, an unrecorded or unper-fected security interest although ineffective against certain third parties, here the trustee, nevertheless remains valid and effective as between the parties — the whole purpose of recordation being the effectiveness vis a vis third parties, [La. law]
CC33W, W & W Oil v. American Supply Co.,
8 So.2d 384 (La.App.1942);
Schutzman v. Dobrowolski,
186 So. 338, 191 La. 791 (1939);
Haines v. Verret,
11 La.Ann. 122 (1856). [Bkrtcy. law]
In Re Evingham,
27 B.R. 128 (Bkrtcy., W.D.N.Y.1983);
Matter of Smith,
16 B.R. 111 (Bkrtcy., E.D. Wisc.1981). Further,
11 U.S.C. § 551
allows the trustee to preserve for the benefit of the estate, the liens he avoids under his
5bh
powers. Thus, in a sense the trustee steps into the shoes of the defeated mortgagee. The sole applicable exception to this preservation power is where the debtor is able to utilize
522(g)
in order to claim his exemption on the recovered property.
Sec. 522(g) (supra) allows the debtor to claim the exemption on the recovered property only in either event that: (1) the lien was involuntary or (2) the debtor could have otherwise avoided the lien under the provisions of
11 U.S.C. § 522(f).
Since there is no dispute that the lien in question was voluntarily placed on the property, the availability of
522(f)
vel non remains the only method by which the instant debtor could be allowed to claim his exemption in accordance with
522(g).
Full Clrcle-The Rule of McManus
11 U.S.C. § 522(f)
permits the debtor to avoid and to claim the exemption on certain types of property subject to a non-possesso-ry, non-purchase money security interest. It provides in pertinent part as follows:
Not withstanding any waiver of exemptions 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 under subsection (b) of this section, if such lien is—
(2) a non-possessory, non-purchase money security interest in any—
(B) implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor (emphasis added)
This court
In Re Babcock,
9 B.R. 475 (Bkrtcy.W.D.La.1981), the first reported case to treat of the effect of
LSA R.S. 13:3885
vis-a-vis
11 U.S.C. § 522(f),
concluded that where property is subject to a valid chattel mortgage the debtor cannot use 522(f) to avoid the effects of that mortgage. In that case this court reasoned as follows:
The key language in 11 U.S.C. 522(f) which allows the debtor to avoid the fixing of a lien on an interest in property to the extent such lien impairs an exemption is: “to which the debtor would have been entitled under subsection (b) of this section.” This language is important because the power to avoid a lien under 522(f) is linked to 522(b). Section 522(b) is the subsection which gives the power to the States to enact their own exemption statutes and preclude the exemptions provided in 522(d) of the Bankruptcy Code. Therefore, the language in 522(f) which allows the debtor to avoid liens on property “to which the debtor would have been entitled under subsection (b)” means property exempt under State law when the State has taken the option to prohibit the Bankruptcy Code exemptions in favor of its own exemptions. In this case State law prohibits avoiding a lien on exempt property where there is a valid chattel mortgage. The exempt status of household items under Louisiana Revised Statutes 13:3881 is changed to non-exempt status by 13:3885.
The property described in 522(f) is not an exemption to which the debtor is entitled. Thus 522(f) could not apply to this situation.
Babcock
(supra) at p. 478
Subsequently, in a case which was on appeal at the time the
Babcock
decision was rendered and which dealt with virtually the identical situation, the U.S. Fifth Circuit Court of Appeal in
Matter of McManus,
681 F.2d 353, 6 C.B.C. 1194 (U.S. 5th Cir.1982) reached the same result based upon almost identical reasons. In fact that court, by whose decisions this court is bound,
in
McManus
went on to squarely hold:
Debtors in Louisiana are not entitled to exempt household goods and furnishings subject to a chattel mortgage from the bankruptcy estate. Consequently a Louisiana debtor may not utilize 11 USCA 522(f) to avoid a chattel mortgage.
McManus
(supra)
Accordingly, today returning to and reiterating the holdings and reasonings of
Bab-cock
and
McManus
this court finds that the debtor cannot be allowed to do indirectly through the use of
522(g)
what he is prevented from doing directly through the use of
522(f).
Specifically the court holds: that a Louisiana debtor may not claim his exemption under
522(g)
on property subject to a voluntarily placed chattel mortgage, at least to the extent of that mortgage.
One further observation, the court notes that Mr. Racca also seems to imply that his equity interest in the subject boat exceeds the remaining balance owed on the debt secured by the chattel mortgage in question. However, the court finds that Mr. Racca has failed to prove this allegation. Therefore, the court does not reach the issue of what effect, if any, this would have on his ability to utilize
11 U.S.C. § 522(g).
Finally the court additionally does not reach the question of the timeliness of the petition to amend relative to Rule 1007(c) which the trustee has raised, as this question is also unnecessary to the determination of the case.
Judgment in accordance with the above will be signed upon submission. All costs of these proceedings are to be paid by the debtor.