In re Anderson, 603 B.R. 564

Debtor filed Chapter 7; on Schedule C claimed a tenancy by the entirety (TbE) exemption in his residence for $368,020 under 11 U.S.C. § 522(b)(3)(B).
Property value disputed (~$558K–$575K); encumbered by a first mortgage ($206,979) and two IRS tax liens totaling several hundred thousand dollars for liabilities owed only by the Debtor (not the non-filing spouse).
Trustee objected to the TbE exemption relying on United States v. Craft and sought to administer/sell the property, proposing to negotiate a carve-out with the IRS to pay unsecured creditors.
Debtor moved to compel abandonment under 11 U.S.C. § 554, arguing sale would not benefit the estate’s unsecured creditors and would harm the non-debtor spouse’s TbE rights.
No joint unsecured creditors exist; the only creditors capable of reaching the TbE property are the mortgagee and the IRS.

Issue	Plaintiff's Argument (Trustee)	Defendant's Argument (Debtor)	Held
Whether a debtor may claim a TbE exemption under §522 when a federal tax lien has attached to the debtor’s interest alone	Craft means federal tax liens constitute "applicable nonbankruptcy law" that prevents TbE exemption where IRS lien attached	Craft involved sovereign tax collection; trustee cannot invoke IRS powers to defeat TbE protections for benefit of individual unsecured creditors	Overruled Trustee’s objection — Debtor may exempt TbE interest; Craft does not permit trustee to administer TbE to pay individual unsecured creditors
Whether trustee may sell TbE property under §363(h) to benefit the estate when property is over-encumbered by tax liens and mortgage	Trustee can seek §363(h) sale if he negotiates a carve-out with IRS that yields benefit to unsecured creditors	Any sale would harm non-debtor spouse and would not benefit general unsecured creditors here; absent a carve-out that benefits joint creditors, property is of inconsequential value	Sale under §363(h) not permitted here; property is burdensome/inconsequential and trustee must abandon under §554

United States v. Craft, 535 U.S. 274 (Sup. Ct. 2002) (federal tax lien may attach to a spouse's interest in TbE property)
Sumy v. Schlossberg, 777 F.2d 921 (4th Cir. 1985) (debtor's interest in entireties property is included in estate; trustee may administer for joint creditors)
Schlossberg v. Barney, 380 F.3d 174 (4th Cir. 2004) (declining to extend Craft to expand trustee's strong-arm powers under §544)
Conrad v. Schlossberg, 555 B.R. 514 (D. Md. 2016) (sustaining trustee objection where federal lien-like restitution attached to TbE property)
Reeves v. Callaway, [citation="546 F. App'x 235"] (4th Cir. 2013) (approving IRS carve-out to permit sale of over-encumbered property where carve-out benefits unsecured creditors)
In re Bunker, 312 F.3d 145 (4th Cir. 2002) (Virginia law protects TbE property from individual creditor process)
Patterson v. Shumate, 504 U.S. 753 (Sup. Ct. 1992) ("applicable nonbankruptcy law" may include federal law when construing exemptions)