Jennings v. Royal (In re: Jennings)

Case Type:
Case Status:
17-8095 (10th Circuit, Sep 14,2018) Published
Debtor was allowed to claim an exemption in his entireties interest in real property located in Wyoming, but only to the extent that his entireties interest exceeded his joint indebtedness with his non-filing spouse. The court affirmed the reasoning of the BAP that the application of the fourth circuit Schlossberg opinion was inapposite because the trustee was not acting on behalf of (or utilizing the section 544 powers for) the IRS, instead challenging the objection based upon the joint liability to the IRS and application under 522 and Wyoming law.
Procedural context:
On appeal from the decision of the Tenth Circuit Bankruptcy Appellate Panel's decision affirming the Bankruptcy Court of Wyoming's finding that the debtor was entitled to certain exemptions in his entireties interest in real property located in Wyoming.
The debtor filed a chapter 7 case and included in his schedule of assets residential property owned as entireties property with his non-filing spouse. The real property had a value of over $304,000, subject to a secured claim of just under $133,000. Included in the debtor's liabilities were two joint debts owed by the debtor and his spouse of almost $117,000 to the IRS and $13,750 to credit cards. The debtor claimed a 100% exemption in the real property under 11 U.S.C. section 522(b)(3)(B). The chapter 7 Trustee objected to the exemption on the basis of Wyoming law which states that entireties property is not exempt from process from claims against both spouses. During the case, the debtor and his non-debtor wife filed an innocent spouse appeal to the United State Tax Court. The appeal was ultimately resolved to establish a joint liability with the non-debtor spouse at just over $114,000. The bankruptcy court found that under Wyoming law, the debtor was allowed an exemption in the entireties property only to the extent the equity exceeds the total amount of joint debts.
Eid, Kelly, and O'Brien

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