OPINION
WILLIAM L. NORTON, Jr., Bankruptcy Judge.
Prior to the filing of their petition, the debtors herein, Joseph Thomas and Mary Nell Maddox, obtained a loan from the defendant, Southern Discount Company. As security for the debt, Southern Discount was given a security interest in certain of the debtors’ household goods. None of the loan proceeds were used to buy any of the items in which the debtors gave Southern Discount a security interest. On September 22, 1980, the debtors filed a petition under Chapter 7 of the Bankruptcy Code. At that time their loan balance was $600.00. The value of the goods given Southern Discount as collateral was $500.00. On October 28, 1980, the debtors filed a complaint seeking to avoid Southern Discount’s nonpossessory, nonpurchase money security interest in their household goods pursuant to 11 U.S.C. § 522(f)(2)(A).
A hearing was held and the parties submitted briefs on two issues: (1) whether the waiver of the filing fees for debtors in adversary proceedings, but not for creditors, is constitutional and (2) whether, under § 522(f), the debtors may avoid a lien on property in which they have no equity.
1.
IS THIS COURT’S DISPARATE TREATMENT OF CREDITORS AND DEBTORS REGARDING THE PAYMENT OF FILING FEES IN ADVERSARY PROCEEDINGS CONSTITUTIONAL?
Creditors are required to pay $60.00 to file a complaint initiating an adversary proceeding in this court. Debtors must pay $60.00 to file a bankruptcy petition but are not required to- pay an additional fee to file an adversary proceeding.
Southern Discount contends that this policy unfairly discriminates against creditors in violation of the equal protection guaranties of Amendment V of the United States Constitution.
The court notes that Southern Discount, lacks standing to raise the issue of the constitutionality of this court’s policy on filing fees. Southern Discount is the defendant in this case. It has not been required to pay any fee to gain access to this court and will not be injured by the debtor’s failure to pay such a fee. Southern Discount thus does not meet the fundamental standing requirement of Article III, namely that a litigant in the federal court “must allege a distinct and palpable injury to himself.”
Moreover, the constitutionality of this policy has been upheld in this district.
National Citizens Bank of Rome v. Purdy,
No. C81-129R (DC ND Ga. Dec. 10, 1980). In that case the District Court, on appeal, found that:
[T]he classification as it creates disparate treatment of debtors and creditors is rational. For the very reason that they are in bankruptcy courts, debtors may not be able to incur additional expenses above that required when filing the petition. Since it is permissible to require those who use the courts to contribute to their financial support,
Ortwein v. Schwab,
410 U.S. 656 [93 S.Ct. 1172, 35 L.Ed.2d 572] (1973), the court finds no constitutional deprivation of constitutional rights in this regard.
This court subscribes to and adopts that ruling. The Judicial Conference rule is not unconstitutional.
2.
DOES § 522(f) OF THE BANKRUPTCY CODE ENABLE THE DEBTORS TO AVOID A LIEN ON PROPERTY IN WHICH THEY HAVE NO EQUITY?
The debtors maintain that Southern Discount’s lien impairs exemptions to which they would be entitled, but for the existence of the lien, under 11 U.S.C. § 522(b),
and that the lien can, therefore, be avoided under 11 U.S.C. § 522(f).
Section 522(f) provides:
In this case the debtors’ § 522(b) exemptions were claimed under a Georgia statute which allows the exemption of:
(f) 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 nonpossessory, nonpurchase-money security interest in any—
(A) household furnishing, household goods, wearing apparel, appliances, books, animals,' crops, musical instruments, or jewelry, that are held primarily for the personal, family, or household use of the debtor or dependent of the debtor;
“(4) The debtor’s interest, not to exceed $200.00 in value in any particular item, in household furnishings, household goods, ...”
Southern Discount argues that the phrase “debtor’s interest” in the Georgia statute means “equitable interest” and thus the state-law exemption can be claimed only in the debtor’s equity in the property, or the value of the property beyond the amount of debt. Southern Discount reasons that, because the debtors owe Southern Discount more than the value of the pledged property, they have no equity in the goods and, as a result, are not entitled to an exemption under state law. Hence, they are not entitled to a § 522(b) exemption and thus have no “interest” to be protected by § 522(f).
This court does not agree with Southern Discount’s interpretation of the meaning or effect of the Georgia statute. First, it seems clear that debtors have an interest even in their fully-encumbered property.
In re Lovett,
11 B.R. 123, 7 BCD 585, 586 (D.C.W.D.Mo.1981); see
In re Giles,
9 B.R. 135, 138 (Bkrtcy.E.D.Tenn.1981). Second, it does not seem likely that the Georgia legislature intended the word “interest” to refer only to the debtors’ equity in the property they seek to exempt. The Georgia statute specifically provides exemptions for the purpose of bankruptcy;
it identifies and sets monetary limits on categories of ex-emptible property but does not otherwise affect the lien avoidance nature of § 522(f).
Giles, supra
at 138-39.
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OPINION
WILLIAM L. NORTON, Jr., Bankruptcy Judge.
Prior to the filing of their petition, the debtors herein, Joseph Thomas and Mary Nell Maddox, obtained a loan from the defendant, Southern Discount Company. As security for the debt, Southern Discount was given a security interest in certain of the debtors’ household goods. None of the loan proceeds were used to buy any of the items in which the debtors gave Southern Discount a security interest. On September 22, 1980, the debtors filed a petition under Chapter 7 of the Bankruptcy Code. At that time their loan balance was $600.00. The value of the goods given Southern Discount as collateral was $500.00. On October 28, 1980, the debtors filed a complaint seeking to avoid Southern Discount’s nonpossessory, nonpurchase money security interest in their household goods pursuant to 11 U.S.C. § 522(f)(2)(A).
A hearing was held and the parties submitted briefs on two issues: (1) whether the waiver of the filing fees for debtors in adversary proceedings, but not for creditors, is constitutional and (2) whether, under § 522(f), the debtors may avoid a lien on property in which they have no equity.
1.
IS THIS COURT’S DISPARATE TREATMENT OF CREDITORS AND DEBTORS REGARDING THE PAYMENT OF FILING FEES IN ADVERSARY PROCEEDINGS CONSTITUTIONAL?
Creditors are required to pay $60.00 to file a complaint initiating an adversary proceeding in this court. Debtors must pay $60.00 to file a bankruptcy petition but are not required to- pay an additional fee to file an adversary proceeding.
Southern Discount contends that this policy unfairly discriminates against creditors in violation of the equal protection guaranties of Amendment V of the United States Constitution.
The court notes that Southern Discount, lacks standing to raise the issue of the constitutionality of this court’s policy on filing fees. Southern Discount is the defendant in this case. It has not been required to pay any fee to gain access to this court and will not be injured by the debtor’s failure to pay such a fee. Southern Discount thus does not meet the fundamental standing requirement of Article III, namely that a litigant in the federal court “must allege a distinct and palpable injury to himself.”
Moreover, the constitutionality of this policy has been upheld in this district.
National Citizens Bank of Rome v. Purdy,
No. C81-129R (DC ND Ga. Dec. 10, 1980). In that case the District Court, on appeal, found that:
[T]he classification as it creates disparate treatment of debtors and creditors is rational. For the very reason that they are in bankruptcy courts, debtors may not be able to incur additional expenses above that required when filing the petition. Since it is permissible to require those who use the courts to contribute to their financial support,
Ortwein v. Schwab,
410 U.S. 656 [93 S.Ct. 1172, 35 L.Ed.2d 572] (1973), the court finds no constitutional deprivation of constitutional rights in this regard.
This court subscribes to and adopts that ruling. The Judicial Conference rule is not unconstitutional.
2.
DOES § 522(f) OF THE BANKRUPTCY CODE ENABLE THE DEBTORS TO AVOID A LIEN ON PROPERTY IN WHICH THEY HAVE NO EQUITY?
The debtors maintain that Southern Discount’s lien impairs exemptions to which they would be entitled, but for the existence of the lien, under 11 U.S.C. § 522(b),
and that the lien can, therefore, be avoided under 11 U.S.C. § 522(f).
Section 522(f) provides:
In this case the debtors’ § 522(b) exemptions were claimed under a Georgia statute which allows the exemption of:
(f) 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 nonpossessory, nonpurchase-money security interest in any—
(A) household furnishing, household goods, wearing apparel, appliances, books, animals,' crops, musical instruments, or jewelry, that are held primarily for the personal, family, or household use of the debtor or dependent of the debtor;
“(4) The debtor’s interest, not to exceed $200.00 in value in any particular item, in household furnishings, household goods, ...”
Southern Discount argues that the phrase “debtor’s interest” in the Georgia statute means “equitable interest” and thus the state-law exemption can be claimed only in the debtor’s equity in the property, or the value of the property beyond the amount of debt. Southern Discount reasons that, because the debtors owe Southern Discount more than the value of the pledged property, they have no equity in the goods and, as a result, are not entitled to an exemption under state law. Hence, they are not entitled to a § 522(b) exemption and thus have no “interest” to be protected by § 522(f).
This court does not agree with Southern Discount’s interpretation of the meaning or effect of the Georgia statute. First, it seems clear that debtors have an interest even in their fully-encumbered property.
In re Lovett,
11 B.R. 123, 7 BCD 585, 586 (D.C.W.D.Mo.1981); see
In re Giles,
9 B.R. 135, 138 (Bkrtcy.E.D.Tenn.1981). Second, it does not seem likely that the Georgia legislature intended the word “interest” to refer only to the debtors’ equity in the property they seek to exempt. The Georgia statute specifically provides exemptions for the purpose of bankruptcy;
it identifies and sets monetary limits on categories of ex-emptible property but does not otherwise affect the lien avoidance nature of § 522(f).
Giles, supra
at 138-39. However, even if the Georgia legislature intended only the equity value to be exempt, “the principle of federal supremacy, applied through the bankruptcy clause of the Constitution, forbids the state from frustrating the intent of Congress [in passing § 522(f)] by such an interpretation of state law.”
In re Meadows,
9 B.R. 882, 883 (Bkrtcy.N.D.Ga.1981);
see In re Pine,
11 B.R. 595 (Bkrtcy.E.D. Tenn.1981);
In re Dubrock,
5 B.R. 353, 6 BCD 771, 773 (Bkrtcy.W.D.Ky.1980);
In re Curry,
5 B.R. 282, 288 (Bkrtcy.N.D.Ohio1980).
A common sense interpretation of § 522(f) with the legislative history of that provision indicates that a debtor may avoid a security interest in property that the debtor could exempt if the security interest did not exist.
Section 522(f) in effect cre
ates equity equal to the amount that could be exempted if the lien did not exist.
In re Farris,
8 B.R. 186, 188 (Bkrtcy.E.D.Tenn.1981). Section 522(f) is an expression of federal public policy favorable to Title 11 debtors founded on evidence of harmful practices of consumer lenders and expressed findings of the Congress. Section 522(f) allows the lien to be terminated vis a vis an allowable exemption in that property. It is keyed to the exemption of such property as the exemption would exist in the absence of the consumer lien. The overwhelming majority of courts considering the question have given § 522(f) this effect.
To hold otherwise would render the provision meaningless and thwart the intention of Congress to remedy a burdensom practice upon unfortunate debtors.
The court finds that § 522(f) “is meant to avoid liens so that there will be equity out of which exemptions may be taken.”
In re Giles,
9 B.R. 135, 139 (Bkrtcy.E.D.Tenn.1981). The court concludes that the lien of Southern Discount here falls precisely within the intended operation of § 522(f). The debtors, therefore, can avoid Southern Discount’s lien on subject property up to the maximum value permitted by the Georgia statute — $200 per item of household goods in which Southern Discount has a security interest.
In accordance with Rule 921, a separate order will be entered consistent with the above findings.