Williams v. Jaffe, No. 18-2726 (7th Cir. 2019)Annotate this Case
In 1998, Williams hired Jaffe as her attorney. The statute of limitations expired before Jaffe filed a complaint. Williams sued for legal malpractice, obtained a default judgment, and recorded that judgment on property owned by Jaffe and his wife as tenants by the entirety. Jaffe filed a chapter 7 bankruptcy petition in 2015, which identified that debt, indicating it was secured by a judgment lien on his residence. On the petition date, Jaffe and his wife owned the property as tenants by the entirety. Before bankruptcy proceedings were complete Jaffe’s wife died.
When she died the tenancy by the entirety terminated; Jaffe held the property individually in fee simple. In Illinois, a creditor cannot force the sale of the tenancy by the entirety property to collect a debt against only one of the tenants but not all interests held by tenants by the entirety are immune from process. Jaffe argued that his contingent future interest in the property was exempt under 11 U.S.C. 522(b)(3)(B), which refers to “any interest in property which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law.
UnThe Seventh Circuit reasoned that the statute exempts any interest held by an individual as a tenant by the entirety to the extent that state law exempts that particular interest so that the property cannot be excluded from the bankruptcy estate.