Bankruptcy Case Confirms Non-Resident’s Exemption of Tenants by Entireties Assets

Jon Alper Tenants By Entireties

I’ve written in previous blog posts that a debtor does not have to be a Florida resident to claim tenants by entireties exemption of assets situated in Florida. The reason is that tenants by entireties protection is based upon common law traditions of property ownership rather than upon exemptions statutes enacted by the Florida and other state legislatures. A Chapter 7 bankruptcy case in 2014 4 reiterates the difference between entireties protection and state exemption statutes where exemption requires residency in the respective state.

This case involved a Chapter 7 West Virginia bankruptcy of a married debtor and the debtor’s eligibility to claim statutory exemptions under West Virginia law or the laws of his prior residency in the state of Virginia.. The court found that this married debtor who had moved to West Virginia from Virginia less than two years prior to filing bankruptcy could not claim either Virginia or West Virginia statutory exemptions, but that he could still exempt in a Chapter 7 bankruptcy Virginia assets owned by the entireties with his non-filing spouse. Virginia common law provides for the exemption of tenants by entireties assets owned by either spouse in or out of bankruptcy.

The judge said that Virginia property held as tenancy by the entireties could be exempt in addition to a state exemption scheme, and that Congress did not intend that the availability of entireties protection depended upon the debtor’s eligibility to claim state law exemptions. The court said that entireties exemption is based upon where the property is located and not the debtor’s domicile. Therefore, this debtor could protect entireties assets located in Virginia despite his ineligibility to use Virginia’s statutory exemptions scheme.

This case is consistent with Florida decisions that have held that Florida assets owned tenants by entireties are exempt from the creditors of either spouse regardless of where the debtor resides in Florida.

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