Ronald Morgan v. Daniel Bruton
The lack of perfection of a federal tax lien did not mean that the entireties interest was exempt under Section 522(b)(3).
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 22-1964 (4th Circuit, Apr 17,2024) Published
- Tag(s):
- Ruling:
- The Fourth Circuit held that "property owned as a tenancy by the entirety may not be exempted from an individual debtor’s bankruptcy estate under 11 U.S.C. § 522(b)(3)(B) to the extent of the debtor’s tax debt to the IRS" even when the IRS has not obtained a perfected tax lien on the property prior to the debtor's filing of the bankruptcy petition.
- Procedural context:
- Ronald Lee Morgan filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Middle District of North Carolina. During his bankruptcy case, Morgan sought to exempt his residence, which he owned jointly with his wife as tenants by the entirety, from his bankruptcy estate to the extent of his outstanding tax debt to the IRS. The trustee objected to the claimed exemption. After a hearing on the matter, the bankruptcy court sustained the objection, and, on appeal, the district court affirmed the bankruptcy court's decision. Morgan then appealed the issue to the Fourth Circuit.
- Facts:
- In July of 2021, Ronald Lee Morgan filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Middle District of North Carolina. Morgan listed his single-family residence, in which he had an interest as a tenant by the entirety, in his schedules of assets and liabilities. Morgan also reported a debt he owed to the IRS. The IRS then filed a proof of claim with the bankruptcy court in the amount of the unsecured debt. Morgan’s wife did not jointly owe her husband's unsecured debt to the IRS, nor did she file for bankruptcy protection. The IRS had not obtained a perfected tax lien on the Morgan residence prior to the filing of Morgan's bankruptcy petition.
- Judge(s):
- Circuit Judge Toby J. Heytens, Circuit Judge DeAndrea Gist Benjamin, and Elizabeth W. Hanes, United States District Judge for the Eastern District of Virginia, sitting by designation.
