638 B.R. 543
Bankr. D.N.J.2022Background
- Debtor Stephen N. Weiss filed Chapter 7 on January 22, 2021 and listed a Tenafly, NJ single-family residence owned with his wife, Roberta Weiss, as tenants by the entirety.
- Weiss claimed the residence exempt under 11 U.S.C. § 522(b)(3)(B) by invoking New Jersey law (N.J.S.A. 46:3-17.2–17.5).
- Creditor Moses & Singer LLP (M&S) had obtained a prepetition judgment against Weiss; the Chapter 7 Trustee and M&S timely objected to the claimed exemption.
- Central dispute: whether New Jersey law exempts an entirety interest from "process" so that § 522(b)(3)(B) applies—i.e., whether a creditor of one spouse may reach any part of that interest.
- Court found New Jersey recognizes dual interests in an entirety estate (a joint undivided interest and an individual right of survivorship) and that the survivorship interest is subject to levy; thus the exemption under § 522(b)(3)(B) fails.
- Trustee’s and M&S’s objections disallowed the claimed exemption; the Property remains subject to the bankruptcy estate.
Issues
| Issue | Weiss's Argument | Trustee/M&S's Argument | Held |
|---|---|---|---|
| Whether Weiss’s entireties interest is exempt from process under NJ law for §522(b)(3)(B) | Entireties ownership is a single, indivisible joint interest; N.J.S.A. 46:3-17.4 bars either spouse from affecting "their interest," so the property is insulated from creditors of one spouse | New Jersey law recognizes two distinct interests (joint undivided interest and individual survivorship right); the survivorship right is subject to levy and therefore the interest is not fully exempt from process | Held for Trustee/M&S: exemption disallowed because the survivorship interest is subject to process under NJ law |
| Whether N.J.S.A. 46:3-17.4 bars all creditor remedies (levy, partition, sale) against entireties property | The Act brings NJ into the majority rule shielding entirety property from creditors of one spouse, barring levies and other process | The Act bars involuntary partition/sale of the joint interest but does not eliminate creditors’ ability to levy on an individual survivorship interest | Held: Act prevents partition/sale of the joint interest but does not preclude levy on the survivorship interest |
| Whether the statute’s plain language supports Weiss’s single-interest theory | "Neither spouse" and "their interest" should be read to mean only a joint shared interest exists and is protected | Read together with N.J.S.A. 46:3-17.5, the statute creates a separate right of survivorship owned individually by each spouse until death | Held: Statutory text (and NJ precedent) demonstrates dual interests; the survivorship right is distinct and individually held |
| Whether legislative history or post-Act NJ case law mandates broader protection for entireties property | Legislative history shows intent to protect non‑debtor spouse and adopt majority approach; Weiss urges a broad, protective reading | Legislative history and cases show the Legislature eliminated unilateral encumbrance/partition but left survivorship rights and levy intact; NJ App. Div. decisions (e.g., Jimenez) confirm levy on survivorship | Held: Legislative history does not support eliminating levy rights; it confirms protections are limited to the joint interest and not the survivorship interest |
Key Cases Cited
- Schwab v. Reilly, 560 U.S. 770 (2010) (timing and presumption rules for objections to claimed exemptions)
- Ron Pair Enters., Inc. v. United States, 489 U.S. 235 (1989) (plain statutory‑text interpretation governing unambiguous statutes)
- Lamie v. United States Trustee, 540 U.S. 526 (2004) (courts enforce plain statutory language absent absurdity)
- In re Visteon Corp., 612 F.3d 210 (3d Cir. 2010) (principles of statutory construction)
- Jimenez v. Jimenez, 454 N.J. Super. 432 (App. Div. 2018) (post‑Act holding: partition/sale barred but creditors may levy on survivorship interest)
- N.T.B. v. D.D.B., 442 N.J. Super. 205 (App. Div. 2015) (discussion of entireties estate and survivorship rights)
- Freda v. Commercial Trust Co., 118 N.J. 36 (1990) (mortgage/liens on entireties property and recognition of survivorship interest)
- Newman v. Chase, 70 N.J. 254 (1976) (equitable partition authority pre‑Act; superseded in part by N.J.S.A. 46:3-17.4 on partition)
- In re Montemoino, 491 B.R. 580 (Bankr. M.D. Fla.) (analysis of NJ entirety statute in bankruptcy context; limited to executing on joint interest)
- In re Wanish, 555 B.R. 496 (Bankr. E.D. Pa.) (bankruptcy decisions addressing NJ Act; interpreted Act as protective but did not resolve survivorship‑levy issue)