Chapter 7 Debtor claimed an exemption in real property owned as tenants by the entireties with his non-filing spouse, to which the Chapter 7 Trustee objected. In response to that objection, the Debtor sought an order compelling the Trustee to abandon the property as burdensome or of inconsequential value to the estate. The property was subject to at least two IRS tax liens, so the Trustee sought to sell the property for the benefit of the IRS citing United States v. Craft, 535 U.S. 274 (2002), after negotiating a “carve out” of a portion of the sale proceeds for the benefit of the Debtor’s unsecured creditors under 11 U.S.C. § 363(h). The Court held that the Debtor may exempt the property held as tenants by the entireties under 11 U.S.C. § 522 where a tax lien has attached to the property for liabilities owed only by the individual debtor and overruled the Trustee’s objection. The Court then ordered the Trustee to abandon the property as any proposed sale of the property – which was over-encumbered by a deed of trust and IRS tax liens – would not benefit general unsecured creditors and would instead create significant harm to the co-owner of the property.
Monday, June 10, 2019