Across the State of Nebraska, you could have heard a collective groan of debtor attorneys as the Nebraska Bankruptcy Court issued a new ruling limiting the ability of debtors to avoid liens in motor vehicles.  In the case of In re Cardwell, the Court ruled that a debtor may not utilize the “Tool of the Trade” exemption of Nebraska statute 25-1556 to avoid such liens unless the vehicle is actually used in the debtor’s trade.


The debtors owned a 2006 Pontiac Montana worth $1,200 and a 1992 Ford F-150 pickup truck worth $800, and they pledged both car titles to First State Bank for a new loan.  After the bankruptcy case was filed, their attorney filed a motion seeking to avoid the liens since Bankruptcy Code 522(f) allows debtors to void liens.

The problem in Cardwell is that neither debtor was self-employed and although they used the vehicles to commute to and from work, they did not use the vehicles to perform their jobs.  As the court noted, the vehicles were used solely for personal purposes and to commute to work.  Therefore, the Court ruled that the vehicles did not qualify as “tools of the trade.”

This is a devastating ruling for debtors who have pledged their vehicle to acquire high interest rate Title Loans.  For decades, Nebraska bankruptcy attorneys have used this statute to return car titles, but now they will have to limit this procedure to cases where a debtor can show the vehicle is actually used in their trade.

the Court did not state is how much a debtor must use a vehicle in their job to enable them to avoid these liens

At first glance it appeared the lien avoidance power was completely abolished for everyone but the self-employed, but a more careful reading of the opinion reveals that debtors may be able to avoid liens in many cases. It is important to note that the Court did not state is how much a debtor must use a vehicle in their job to enable them to avoid these liens.  For example, paralegals in our law firm frequently use their vehicles to make trips to the Post Office or to file documents in the courthouse.  Is that enough use to invoke the avoidance power?  Nebraska bankruptcy attorneys will need to emphasize how a debtor utilizes their vehicle in their job to gain access to the lien avoidance power.