In re Scott N. Jaffe

Filing 20

MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 5/22/2018: For the reasons set forth in the accompanying Memorandum Opinion and Order, the Bankruptcy Court's order of June 7, 2017 is reversed and the proceeding is remanded to the Bankruptcy Court for further proceedings consistent with this opinion. Enter Judgment Order. Civil case terminated. Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SCOTT N. JAFFE,
Debtor-Appellant,
v.
LAVERNE WILLIAMS,
Creditor-Appellee.

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No. 17 CV 4662
Judge John J. Tharp, Jr.
(Bankruptcy Case 15 BK 39490)
(Adversary Proceeding 16 AP 156)

MEMORANDUM OPINION AND ORDER
This is an appeal from a bankruptcy court order denying the debtor’s motion to avoid a
creditor’s judgment lien on property that the debtor held with his wife on the petition date in
tenancy by the entirety. Sections 522(b) and (f) of the bankruptcy code (11 U.S.C. § 522), in
combination, permit a debtor to avoid a judgment lien for property held in tenancy by the
entirety to the extent that that the tenancy interest is exempt from legal process under state law.
In Illinois, tenants by the entirety also hold, in addition to their entirety interests, individual
contingent future interests in the tenancy property. This case presents the questions of whether a
judgment lien attaches to those contingent future interests and, if so, whether that lien may be
avoided. The bankruptcy court denied the debtor’s motion to avoid the creditor’s lien, holding
that—unlike the tenancy interest—contingent future interests are not exempt under § 522(b) and
a lien on those interests may therefore not be avoided under § 522(f). This Court agrees with the
bankruptcy court that the creditor’s judgment lien attached to the debtor’s contingent future
interests in the property, but concludes that those contingent future interests—like the tenancy
interests—are exempt under § 522(b)(3). The bankruptcy court’s denial of the debtor’s motion to
avoid the creditor’s judgment lien is therefore reversed.

I. BACKGROUND
The facts are undisputed and are set forth in the bankruptcy court’s order. Briefly,
Appellant Scott Jaffe and his wife owned, as tenants by the entirety, 1 a residence in Highland
Park, Illinois. In 2005, Appellee Laverne Williams obtained a judgment against Jaffe for
$500,000 and recorded that judgment in Lake County, Illinois.
Jaffe filed a chapter 7 bankruptcy petition in 2015. His wife died about a year later, in
November 2016. Jaffe subsequently moved to avoid Williams’ judgment lien on the ground that
the property was exempt from satisfaction of the judgment and the lien impaired that exemption.
Conceding that the property was exempt when Jaffe filed his petition, Williams contested the
motion by arguing that when he filed his petition, Jaffe also possessed contingent future interests
in the property that were not subject to the tenancy by the entirety exemption. Williams
maintained that her lien attached to those interests which, after Jaffe’s wife died and the tenancy
by the entirety ended, were no longer contingent.
The bankruptcy court agreed and denied Jaffe’s motion to avoid Williams’ judgment lien.
Jaffe then filed a timely appeal. This Court has jurisdiction over the appeal pursuant to 28 U.S.C.
§ 158(a)(1).
II. ANALYSIS
This case presents two interrelated questions of law: (1) whether a judgment lien attaches
to contingent future interests in real property held in tenancy by the entirety when a bankruptcy

1

“A tenancy by the entirety is a unique sort of concurrent ownership that can only exist
between married persons. . . . Like joint tenants, tenants by the entirety enjoy the right of
survivorship. Also like a joint tenancy, unilateral alienation of a spouse's interest in entireties
property is typically not possible without severance. Unlike joint tenancies, however, tenancies
by the entirety cannot easily be severed unilaterally. Typically, severance requires the consent of
both spouses … or the ending of the marriage in divorce.” United States v. Craft, 535 U.S. 274,
280–81 (2002) (internal citations omitted).
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petition is filed; and (2) if so, whether such a lien may be avoided. The parties agree about
everything of relevance to these questions except the answers.
Section 522 of the bankruptcy code permits debtors to exempt from the bankruptcy estate
administration 2 certain property, including as relevant here “any interest in property in which the
debtor had, immediately before the commencement of the [bankruptcy] case, an interest as a
tenant by the entirety, … to the extent that such interest as a tenant by the entirety is exempt from
process under applicable nonbankruptcy law.” 11 U.S.C. § 522(b)(3)(B). The reference to
applicable non-bankruptcy law takes us to section 12-112 of the Illinois Code of Civil Procedure,
which provides in relevant part that “[a]ny real property … held in tenancy by the entirety shall
not be liable to be sold upon judgment entered … against only one of the tenants ….” 735 ILCS
5/12-112. In combination, these provisions preclude the sale in the bankruptcy case of property
held by the debtor as of the petition date in tenancy by the entirety to satisfy a judgment lien
entered against the debtor only.
Section 522 also provides that a debtor “may avoid the fixing of a lien on an interest of
the debtor in property to the extent that such lien impairs 3 an exemption to which the debtor
would have been entitled under [§ 522(b)].” 11 U.S.C. § 511(f)(1)(A). Judicial liens are

2

Technically, all property of the debtor is included in the bankruptcy estate, including
property held in tenancy by the entirety. In re Hunter, 970 F.2d 299, 302-03 (7th Cir. 1992).
Exempt property, however, is not subject to administration or liquidation for the benefit of
creditors. “Exempt property is removed from the estate, and so is retained by the debtor rather
than being liquidated by the trustee.” In re Chinosorn, 243 B.R. 688, 699 (Bankr. N.D. Ill.),
rev’d on other grounds, 248 B.R. 324 (2000).
3

A judicial lien “impairs” an exemption when “the sum of (i) the lien; (ii) all other liens
on the property; and (iii) the amount of the exemption that the debtor could claim if there were
no liens on the property; exceeds the value that the debtor’s interest in the property would have
in the absence of any liens.” 11 U.S.C.§ 522(f)(2)(A). There is no dispute about impairment in
this case; the parties agree that Williams’ lien (if it exists) impairs Jaffe’s exemption (if it exists).
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expressly identified as among the liens that may be avoided on this basis. Id. This is the
provision on which Jaffe’s motion to avoid Williams’ judicial lien directly relies.
The parties agree that Williams’ judgment, properly recorded, gave rise to a lien; they
disagree, however, about the extent of that lien. Jaffe maintains that Williams’ lien attached only
to his interest in the property as a tenant by the entirety and that the express terms of § 522(b)(3)
and § 12-112 exempt that property interest from the bankruptcy estate and allow him to avoid
that lien under § 522(f). Williams is agnostic on whether she had a lien on Jaffe’s interest in the
property as a tenant by the entirety because she acknowledges, lien or no, she could not force a
sale of the property itself while it was held in tenancy by the entirety. 4 Williams contends,
however, that even if she has no lien as to Jaffe’s tenancy by the entirety, she has a judgment lien
as to Jaffe’s contingent future interests in the property—that is, his future individual possessory
interests in the property upon termination of the tenancy. Those interests, Williams maintains,
are not exempt and therefore cannot be avoided under § 522(f). Jaffe, in turn, argues in the
alternative that § 522(b) and § 12-112 permit him to avoid Williams’ lien even if that lien also
attached to his contingent future interests in the property.

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If Williams had no lien, she had no right to force a sale of the property and she
acknowledges that if she had a lien on Jaffe’s interest in the Highland Park residence as a tenant
by the entirety, that interest was exempt from her judgment lien as long as the tenancy by the
entirety continued. As Williams point out, there are divergent views in cases interpreting Illinois
law as to whether a lien on property held in tenancy by the entirety arises from a judgment
against one of the tenants. Some take the view that no lien arises because the property would be
exempt from judgment; others maintain that a lien arises but is merely unenforceable by virtue of
the exemption. See Appellee’s Brief, ECF No. 18, at 3; Chinosorn, 243 B.R. at 694-95
(discussing the competing arguments); In re Tolson, 338 B.R. 359, 366 (Bankr. C.D. Ill. 2005)
(“The difference between these opposing views concerns whether the lien attaches to the
judgment debtor’s interest in the real estate but cannot be presently enforced, or whether the
judgment creditor’s inability to enforce the lien defeats its validity.”). For purposes of this case,
however, the resolution of this question does not matter. As discussed further below, whether a
lien arises as to Jaffe’s interest in the property as a tenant by the entirety, the Court agrees with
Williams that a lien arises as to Jaffe’s contingent future interests in the property.
4

In Illinois, a tenancy in the entirety exists “only if, and as long as, the tenants are and
remain married to each other,” and only for as long as the married couple use the property as
their “homestead.” 765 ILCS 1005/1c. And because a tenancy by the entirety will inevitably
terminate at some point, whether by reason of death, dissolution of the marriage, or some mutual
decision of the tenants (such as changing their homestead), the statute creating tenancy by the
entirety also describes the interests that the tenants will hold when the tenancy by the entirety
ends, such as “(a) an interest as a tenant in common in the event of divorce, (b) an interest as a
joint tenant in the event that another homestead is established, and (c) a survivorship interest in
the entire property in the event of the other tenant’s death.” In re Chinosorn, 243 B.R. 688, 695
(Bankr. N.D. Ill.), rev’d on other grounds, 248 B.R. 324 (2000); 765 ILCS 1005/1c. In this case,
the survivorship interest is front and center, because Jaffe’s tenancy by the entirety interest
terminated with his wife’s passing. The statute providing for tenancy by the entirety expressly
holds that “upon the death of either such tenant the survivor shall retain the entire estate.” Id.
That is to say that upon the death of one of the tenants by the entirety, the fee simple interest in
the property passes from the entirety to the surviving spouse.
“The contingent right of survivorship of each entireties tenant is a present property right
to which a judgment lien extends.” In re Tolson, 338 B.R. 359, 367 (Bankr. C.D. Ill. 2005).
Judge Wedoff provided the foundation for this conclusion in Chinosorn:
[U]nder the language of the relevant Illinois statutes, a judgment
against an individual owning property as a tenant by the entirety,
when properly recorded, appears to give rise to a lien, not against
the entirety property itself, but rather against the individual
tenant’s contingent future interests.

The basic provision establishing judgment liens in Illinois is 735
ILCS 5/12–101, which provides that “a judgment ... is a lien on the
real estate of the person against whom it is entered ... from the time
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... a memorandum of the judgment is filed in the office of the
recorder in the county in which the real estate is located.”5 For
purposes of such judgment liens, “real estate” is broadly defined
by 735 ILCS 5/12–105 to include “lands, tenements,
hereditaments, and all legal and equitable rights therein, including
estates for the life of the debtor or of another person” (emphasis
added), so that all of the interests of a tenant by the entirety are
within the “real estate” subject to judgment liens. The rights of an
individual tenant by the entirety plainly include more than an
undivided fee simple interest in the property with the other spouse.
These rights include (1) a present interest in any rents or other
income from the property (which the Illinois statute expressly
makes subject to garnishment to satisfy the judgment of a creditor
of only one tenant), and (2) several different types of contingent
future interests, including (a) an interest as a tenant in common in
the event of divorce, (b) an interest as a joint tenant in the event
that another homestead is established, and (c) a survivorship
interest in the entire property in the event of the other tenant's
death.
Chinosorn, 243 B.R. at 695. Judge Wedoff’s analysis on this point was, strictly speaking, dicta, 5
but it is persuasive and was subsequently adopted by the bankruptcy courts in Tolson and In re
Yotis, 518 B.R. 481 (Bankr. N.D. Ill. 2014), both of which held that judgment liens attach to the
contingent future interests of tenants by the entirety. See In re Tolson, 338 B.R. at 367-368; In re
Yotis, 518 B.R. at 488 (a “judgment lien does not attach to the fee interest in property held by the

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In Chinosorn, Judge Wedoff did not definitively decide the issue of whether a lien
against the contingent future interests of the debtor gave rise to a judgment lien because he
concluded that the answer made no difference to his ruling. Concluding that any such lien would
not be avoidable, he concluded that the debtor’s motion would be denied in either case—as
unnecessary if there were no lien and as non-avoidable if there were a lien. In this case, however,
the Court addresses the lien question because it is a pure question of law that has been fully
briefed by the parties. Planned Parenthood of Indiana, Inc. v. Comm’r of Indiana State Dep’t
Health, 699 F.3d 962, 986 (7th Cir. 2012) (“The issue was preserved in the district court, the
parties have briefed it on appeal, and because it raises a purely legal question, it makes sense for
us to address it here.”). Further, the predicate issue of whether a lien on Jaffe’s contingent future
interests attached is helpful to an understanding of the question of whether that lien can be
avoided pursuant to § 522(b) and (f).
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married couple as tenants by the entirety. However, the resulting judgment lien would attach
against any interest either spouse holds or might individually hold in the future.”).
Jaffe maintains that a judgment lien does not attach to future contingent interests in
property held by tenancy in the entirety. To support this contention, he offers no substantive
argument but points principally to three cases in which bankruptcy courts permitted debtors who
held property by tenancy in the entirety to avoid judgment liens on the property. See In re Allard,
196 B.R. 402 (Bankr. N.D. Ill. 1996); In re Mukhi, 246 B.R. 859 (Bankr. N.D. Ill. 2000); and In
re Moreno, 352 B.R. 455 (Bankr. N.D. Ill. 2006). None of these cases, however, held that a
judgment lien does not attach to future contingent interests of tenants by the entirety, much less
offers any rationale to reject that proposition. 6 As such, they provide no analytical support for
Jaffe’s position. 7 Indeed, Judge Schmetterer, who authored both Mukhi and Moreno, also
authored Yotis, an opinion that unequivocally endorsed the view that a judgment lien attaches to
the contingent future property interests of tenants by the entirety, and in that opinion observed
that Mukhi held “that at the very least, a lien arose against the debtor’s contingent future
interest.” In re Yotis, 518 B.R. at 488.
Concluding that Williams’ judgment gave rise to a lien against Jaffe’s contingent future
interests in the property brings us to the second question presented by this appeal: whether those
contingent future interests are exempt under § 522(b)(3)(B) and § 12-112, and therefore
avoidable under § 511(f). This question can, in the Court’s view, be answered by straightforward
application of the text of § 522(b)(3)(B).

6

Jaffe asserts that these cases are “better reasoned” than those holding that a lien attached
to his contingent future interests, but fails to explain why.
7

Of course, even if these cases had held that no lien attaches to the contingent future
interests of tenants by the entirety, they would not bind this Court.
7

Section 522(b)(3)(B) applies, as relevant here, to “any interest in property in which the
debtor had, immediately before the commencement of the case, an interest as a tenant by the
entirety … to the extent that such interest as a tenant by the entirety … is exempt from process
under applicable nonbankruptcy law.” Unpacking this provision, § 522(b)(3)(B) exempts:
(i) any interest in property;
(ii) in which the debtor had an interest as a tenant in the entirety;
(iii) at the time the bankruptcy petition was filed;
(iv) to the extent that state law exempts an interest as tenant in the entirety from legal
process.
Applying these statutory criteria leads directly to the conclusion that Jaffe’s contingent
future interests in the property, like his interest as a tenant by the entirety, are exempt from
bankruptcy administration. Immediately before the bankruptcy case was commenced by the
filing of Jaffe’s chapter 7 petition, Jaffe had “an interest as a tenant by the entirety” in the
Highland Park property and, as discussed above, at that time he also had contingent future
interests in that property. Jaffe thus had: (i) “an interest (i.e., his contingent future interest) in
property”; (ii) in which he had an interest as a tenant by the entirety [i.e., the Highland Park
property]; (iii) on the petition date; and (iv) that contingent future interest is therefore exempt “to
the extent that such interest as a tenant by the entirety … is exempt from process under
applicable nonbankruptcy law.” As discussed above, there is no dispute that Jaffe’s interest as a
tenant by the entirety is exempt from process under § 12-112, and so Jaffe’s contingent future
interests were therefore exempt at petition filing to the same extent—that is, completely.
Relying on Chinosorn and Yotis, the bankruptcy court reached a contrary result, holding
that § 12-112 “does not protect from execution the tenant’s contingent future interests.” Opinion,
ECF No. 10-1, at 6. The bankruptcy court’s opinion, however, did not parse the language of
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§ 522(b)(3), focusing instead only on the state law exemption provided by § 12-112. With that
narrow perspective, the bankruptcy court concluded that because § 12-112 exempts only
property “held in tenancy by the entirety,” the debtor’s contingent future rights were not exempt
under § 522(b)(3) and could not therefore be avoided pursuant to § 511(f). See Opinion at 6
(“Because a tenant’s contingent future interests are not exempt under section 12-112, a judicial
lien against them cannot be avoided.”). Yotis and Chinosorn similarly glossed over the text of
§ 522(b)(3), interpreting the statute to say nothing more than that property held in tenancy by the
entirety is exempt to the same extent that it is immune from process under state law. See Yotis,
518 B.R. at 489 (“§ 522(b)(2)(B) exempts entireties property ‘to the extent’ state law presently
exempts that property from process”); Chinosorn, 243 B.R. at 700 (“§ 522(b)(2)(B) of the
Bankruptcy Code allows a bankruptcy exemption for property held in tenancy by the entirety, “to
the extent’ that state law makes such property ‘exempt from process’”). 8 Williams’ brief, which
devotes all of three sentences to the question, follows suit. See Response, ECF No. 18, at 8

8

Yotis relied heavily on the analysis in Chinosorn, which was in turn supported by two
cases, Arango v. Third Nat’l Bank (In re Arango), 992 F.2d 611 (6th Cir. 1993), and Community
Nat’l Bank & Trust Co. v. Persky (In re Persky), 893 F.2d 15 (2d Cir. 1989). Neither case,
however, was based on analysis of whether a contingent future interest in property held in
tenancy by the entirety was included within the exemption offered by § 522(b)(3). In Arango, the
debtor did not argue that his right of survivorship was exempt; he argued he could avoid a lien
against his survivorship interest because “his present possessory interest in entireties property”
was exempt. 992 F.2d at 614 (emphasis added). Consequently, the opinion does not discuss
whether the survivorship right itself was exempt.
Persky is similarly irrelevant. In that case, the Second Circuit held that the property at
issue, held in tenancy by the entirety, could be sold because—unlike Illinois—New York did not
preclude the sale of tenancy interests as a matter of state law. See In re Persky, 893 F.2d at 19
(citing state law authorities to show that “the interest of a tenant by the entirety is not exempt
from sale and enforcement by execution” under state law). The case does not address whether
contingent future interests are exempt in states, like Illinois, where tenancy by the entirety
interests are not exempt from forced sale.
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(referring only to § 12-112 and omitting any reference to § 522(b)(3) in arguing that Jaffe’s
contingent future interests were not exempt).
Respectfully, and contrary to the implication of these summary restatements, § 12-112
does not stand alone. Bankruptcy exemptions are defined, in the first instance, by § 522 and the
terms of that provision determine what state law—here, § 12-112—has to say about the degree of
the property exemption. Section 12-112 tells us that the property included within the § 522(b)(3)
is as exempt from sale as is the interest of a tenant by the entirety under state law. But it does not
identify the property that is subject to that exemption.
The preceding elements of § 522(b)(3)—“any interest in property in which the debtor had
… an interest as a tenant by the entirety”—do that. But in focusing only on § 12-112, the
bankruptcy court effectively excised the first element—“any interest in property”—from the
statute and consequently misconstrued § 522(b)(3). As did the Chinosorn and Yotis courts before
it, the bankruptcy court read the bankruptcy exemption statute to extend only to “property in
which the debtor had an interest as a tenant”; as construed by the bankruptcy court, § 522(b)(3)
would read: “Property in which the debtor had an interest as a tenant by the entirety is exempt to
extent that such interest as a tenant by the entirety is exempt from process under applicable
nonbankruptcy law.” But that is not what the statute says; it expressly applies not only to the
tenancy interest but also to “any interest in property in which the debtor had … an interest as a
tenant by the entirety.” “Any interest in property” in which one of the interests is a tenancy
interest plainly encompasses more than just the tenancy interest. Had Congress intended to
provide an exemption in § 522(b)(3) only to interests in tenancies by the entirety, there would
have been no need to refer to “any property interest” other than the interest of a tenant by the
entirety; as construed by the bankruptcy court, the phrase “any interest in property” is nothing

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but surplusage. “It is a cardinal principle of statutory construction that a statute ought, upon the
whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant.” TRW Inc. v. Andrews, 534 U.S. 19, 49 (2001) ((internal
quotation marks omitted). The bankruptcy court’s interpretation of § 522(b)(3)(B) violates that
foundational principle.
As written, the statute plainly includes within the exemption “any” interests in the
property held in addition to an interest as tenant by the entirety, and so extends to the other
interests Jaffe held in the Highland Park property, namely his contingent future interests. And
read in its entirety (pun intended), the statute makes clear that any interest—including, therefore,
a contingent future interest—in the property held in tenancy by the entirety is exempt “to the
extent that such interest as a tenant by the entirety is exempt” under state law—that is, to the
same extent that the tenancy by the entirety is exempt under state law.
In the context of this case, then, the statute provides that contingent future interests in
property held in tenancy by the entirety are exempt from the bankruptcy estate to the same extent
that the tenancy by the entirety is immune from forced sale under state law. Accordingly, the
bankruptcy court should not have denied Jaffe’s motion to avoid the lien on the basis that his
contingent future interests in the Highland Park property were not exempt under § 522(b)(3).
* * * * *
For the foregoing reasons, the bankruptcy court’s order of June 7, 2017, is reversed and
this proceeding is remanded for further proceedings consistent with this opinion.

______________________
John J. Tharp, Jr.
United States District Judge

Dated: May 22, 2018
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