555 B.R. 496
Bankr. E.D. Pa.2016Background
- Debtor and non-debtor spouse own a 2008 mobile home located in New Jersey valued at about $100,000.
- Debtor filed a Chapter 7 bankruptcy case in Pennsylvania and claimed the full value of the mobile home as exempt under 11 U.S.C. § 522(b)(3)(B) relying on New Jersey law recognizing tenancies by the entirety in personal property (N.J.S.A. 46:3-17.2–17.4).
- Trustee objected, initially arguing (1) Debtor could not use New Jersey exemptions in a Pennsylvania case, (2) a creditor of one spouse may levy/sell entireties property so Debtor’s interest is not exempt, and (3) Trustee could sell both spouses’ interests under § 363(h).
- Trustee withdrew the choice-of-law objection, but maintained that New Jersey law permits creditors of one spouse to levy/sell entireties property and that § 363(h) sale was available if Debtor’s interest were nonexempt.
- Court analyzed the NJ Statute, post-enactment New Jersey and federal decisions, and concluded the NJ Statute bars creditors of one spouse from levying or selling personal property held as tenants by the entirety without the nondebtor spouse’s consent; thus Debtor’s interest is exempt and § 363(h) sale is inapplicable.
Issues
| Issue | Debtor's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether Debtor may claim New Jersey exemption while filing bankruptcy in Pennsylvania | Debtor: New Jersey exemptions apply; NJ Statute allows entireties protection for personal property | Trustee: (abandoned) initially said Pennsylvania filing precludes NJ exemption | Court: Trustee withdrew this; not decided as a barrier here |
| Whether creditors of one spouse may levy/sell personal property titled as tenancy by the entirety created after NJ Statute | Debtor: NJ Statute prohibits levy/sale without both spouses’ consent; protects entireties personal property | Trustee: Some post-statute cases permit levy/sale; argues Debtor’s interest not exempt | Court: NJ Statute and cases interpreting it bar levy/sale; Debtor’s interest is exempt under § 522(b)(3)(B) |
| Effect of prior New Jersey decisions issued before NJ Statute or involving pre-statute tenancies | Debtor: Post-statute cases control; pre-statute precedent inapplicable | Trustee: Relies on pre-statute cases and later decisions that didn’t consider statute | Court: Disagrees with those cases for failing to account for NJ Statute; only post-statute analyses applying the statute are persuasive |
| Whether Trustee may sell both spouses’ interests under § 363(h) | Debtor: Sale would harm nondebtor spouse; if forced sale allowed, only Debtor’s fractional interest could be sold | Trustee: § 363(h) permits sale to benefit estate despite co-owner interest | Court: § 363(h) inapplicable because Debtor’s interest is exempt; estate has no interest to sell |
Key Cases Cited
- Newman v. Chase, 359 A.2d 474 (N.J. 1976) (pre-statute entireties jurisprudence relied on by some later courts)
- Freda v. Commercial Trust Co. of N.J., 570 A.2d 409 (N.J. 1990) (recognized NJ Statute did not apply to entireties created before its effective date)
- Lewis v. Harris, 908 A.2d 196 (N.J. 2006) (recognizes effect of 1987 enactment creating statutory protection for entireties interests in personal property)
- In re Montemoino, 491 B.R. 580 (Bankr. M.D. Fla. 2012) (interprets NJ Statute as elevating spouses’ protection in entireties property over single-spouse creditors)
- United States v. Avila, 88 F.3d 229 (3d Cir. 1996) (example of post-statute case relied on by Trustee; court distinguished such authorities that failed to consider the NJ Statute)