In a recent case to come out of the Third Circuit a Chapter 7 debtor was able to void several significant judgment liens in property he jointly owned with his wife as tenants by the entirety. At stake in this case were two properties:
- The debtor’s home worth over $150,000
- A commercial property worth $55,000
Both properties had significant judgment liens and the judgments were held against the debtor alone. After filing for bankruptcy the debtor filed a motion asserting that the inchoate judicial liens impaired his exemptions in the properties, and should be avoided pursuant to Section 522(f). In response to this one of the creditors argued that “one spouse in a bankruptcy, holding property as a tenant by the entirety, cannot avoid a lien because the lien does not impair the immunity of process.”
However in response to this the Court held that debtors may exempt their interest in property owned as tenants by the entirety such that the property cannot be reached by creditors of only one spouse. Furthermore it has also been held that a lien against one tenant in entireties property is at least an inchoate lien and may be avoided under Section 522(f) as impairing the debtor’s exemption. Despite the fact that the creditors had a valid judgment against the individuals property and the fact that more than one person had an interest in the property the court still held that the individual debtors liens may still be voided. Basically what all of this means is that a lien against one tenant in entireties property may be avoided under Section 522(f).