Leonard Loventhal v. Zisl T. Edelson
Filed opinion of the court by Judge Posner. AFFIRMED. Richard A. Posner, Circuit Judge; Michael S. Kanne, Circuit Judge and Diane S. Sykes, Circuit Judge. [6806137-1]  [16-1290]
United States Court of Appeals
For the Seventh Circuit
ZISL TAUB EDELSON,
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15 C 6397 — Elaine E. Bucklo, Judge.
ARGUED DECEMBER 13, 2016 — DECIDED DECEMBER 21, 2016
Before POSNER, KANNE, and SYKES, Circuit Judges.
POSNER, Circuit Judge. Mrs. Edelson filed a Chapter 13
bankruptcy petition in the U.S. Bankruptcy Court for the
Northern District of Illinois, hoping to erase a debt owed by
her. She and her husband Claude (who did not join her peti‐
tion or file his own) had in 2001 bought a single‐family home
in Chicago that the parties refer to as the “Farwell Resi‐
dence,” and together became the owners of the home as
“tenants by the entirety.” Thirteen years later, about seven
months before Mrs. Edelson filed her bankruptcy petition,
the couple conveyed the home to the husband’s living trust.
The conveyance states that “the beneficial interest” in the
trust is held by both Mr. and Mrs. Edelson, “husband and
wife, as tenant[s] by the entirety.”
Mrs. Edelson’s bankruptcy petition named as one of her
unsecured creditors Leonard Loventhal, a former husband;
her debt to him—just over $92,000—was based on a judg‐
ment that he’d obtained against her. Often in a Chapter 13
bankruptcy plan some of the debtor’s most important prop‐
erty is deemed “exempt”—i.e., not available for paying off
creditors. Mrs. Edelson proposed a payment plan that would
give Loventhal $16,000 over five years, but she designated
the Farwell Residence as exempt. In his appeal to us Lov‐
enthal challenges the designation of the Edelsons’ house as
exempt, obviously hoping the property will become a part of
Mrs. Edelson’s assets that he can draw on.
Loventhal concedes, however, that if Mrs. Edelson is a
tenant by the entirety (which he denies, as we’ll see), her in‐
terest in the home would be exempt from his bankruptcy
claim. A tenancy by the entirety allows spouses (and only
spouses) to own property together as a single legal entity.
Each must have an equal undivided interest in the property
and a right of survivorship; neither may have the power act‐
ing alone to alienate the property. Creditors of one of the
spouses may not attach and sell the interest of a debtor
spouse; only creditors of the couple may attach and sell the
interest in the property owned by a tenancy by the entirety;
and so a tenant by the entirety may not sell or give away his
interest in the property without the consent of the other ten‐
ant. Upon the death of one of the spouses the deceased
spouse’s interest in the property devolves to the surviving
spouse rather than to other heirs of the deceased spouse. Di‐
vorce and moving to another primary residence also sever
the tenancy by the entirety.
Loventhal argues that the transfer of the property of the
Edelsons’ tenancy by the entirety to the husband’s trust
eliminated the tenancy by the entirety and thereby removed
the shield that it had provided against Loventhal’s enforce‐
ment of his claim against her; her half interest in the proper‐
ty, he argued, severed from the tenancy by the entirety, was
fair game for him. The bankruptcy judge disagreed; the dis‐
trict court affirmed; and Loventhal now appeals to us, argu‐
ing that the tenancy by the entirety having been dissolved,
Mrs. Edelson was not entitled to the exemption that she
She argues that his appeal is moot because the bankrupt‐
cy court confirmed her plan and Loventhal didn’t appeal the
confirmation. But a debtor in a Chapter 13 bankruptcy
makes payments over several years, and during that period
the bankruptcy plan can be modified—or even converted
into a Chapter 7 (liquidation) bankruptcy plan. See 11 U.S.C.
§§ 1307(c), 1329(a)(1); In re Urban, 375 B.R. 882, 887 (B.A.P.
9th Cir. 2007).
The bankruptcy code provides in 11 U.S.C. § 522(b)(3)(B)
that “any interest in property in which the debtor had, im‐
mediately before the commencement of the [bankruptcy]
case, an interest as a tenant by the entirety” is exempted in
the bankruptcy proceeding “to the extent that such interest
… is exempt from process under applicable nonbankruptcy
law,” which so far as relates to this case is 735 ILCS 5/12‐112.
That Illinois statute (the relevant nonbankruptcy law) ex‐
empts tenancies by the entirety from process to satisfy
judgment “against only one of the tenants” (which in this
case would be Mrs. Edelson). And the deed of the Farwell
Residence to Mr. Edelson’s living trust states that “the bene‐
ficial interest of said trust [is] being held by [the Edelsons],
husband and wife, as a tenancy by the entirety.” Moreover,
the Illinois Joint Tenancy Act, 765 ILCS 1005/1c, as amended,
states that when a trust “specifically state[s] that the interest
of the husband and wife to the homestead property are to be
held as tenants by the entirety, the estate created shall be
deemed to be a tenancy by the entirety.” The trust instru‐
ment even provides (unnecessarily) that nothing in it shall
conflict with the Joint Tenancy Act.
It’s true—and is Loventhal’s principal argument—that
the trust instrument contains (presumably at the behest of
Mr. Edelson, the trustee, or advisers to him) provisions that
are inconsistent with a tenancy by the entirety. For example,
the trust instrument allows the trustee in his “sole and abso‐
lute discretion” to pay his legally enforceable debts from the
trust and to amend the trust “in whole or in part,” again uni‐
laterally—and even to “revoke the trust,” also unilaterally;
and “upon revocation, the trustee shall deliver the trust
property to me” (i.e., to Mr. Edelson). And there is more. But
it’s all irrelevant, because the Joint Tenancy Act forbids any
construal of the trust that would sever the tenancy by the
entirety. The portions of the trust that we’ve just quoted
would if applied to the Farwell Residence sever the tenancy
by the entirety and are therefore unenforceable.
So the tenancy by the entirety will perdure no matter
what changes Mr. Edelson makes in the trust. Of course,
Loventhal will still be able to collect the $16,000 that Mrs.
Edelson has committed to pay him under the bankruptcy
plan, but that is not relevant to this appeal. The judgment of
the district court is
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