Exemptions for Joint Tenancy and Separate Living

Posted by NCBRC - October 5, 2022

The debtors were entitled to exempt only their one-half interest in one of the two residences where they owned both properties jointly but the husband lived in one residence and the wife lived in the other. They could avoid the creditor’s judgment lien to the extent the lien impaired those exemptions. In re Snyder, No. 21-31521 (Bankr. N.D. Ohio Sept. 23, 2022).

Both of the debtors’ residential properties, plus a third non-residential property, were encumbered by a single judgment lien in the amount of $109,588.56. When they filed for chapter 7 bankruptcy, the husband sought to exempt the entire value of the property where he lived, and the wife sought to do the same with the property where she lived. The judgment creditor objected to the exemptions and the debtors moved to avoid the judgment lien in its entirety as impairing their exemptions.

Addressing the exemptions, the court looked to Ohio Revised Code §2329.66(A)(1)(b), which provides that a debtor may exempt “the person’s interest, not to exceed [$145,425.002], in one parcel or item of real or personal property that the person or dependent of the person uses as a residence.”

The court began with an analysis of the meaning of “interest” under Ohio joint tenancy law, finding that, because the debtors were joint owners of the two properties, they each had only a one-half interest in both of the properties.

The exemption also requires that debtors reside on the property they seek to exempt. Therefore, the debtors in this case could take an exemption only for the property on which they lived. In this case, the husband’s residence was worth $45,420.00, so, based on his one-half interest, he could take an exemption in the amount of $22,710.00. The wife’s home was worth $136,120.00 so she was entitled to an exemption in the amount of $68,060.00.

The court sustained the creditor’s objection to the exemptions to the extent they exceeded those amounts.

The court turned to the debtors’ motions to avoid the creditor’s judicial lien as impairing their exemptions under section 522(f). To determine whether an exemption is impaired, “First, the court must calculate the sum of the lien, all other liens, and the debtor’s exemption. Second, the court must subtract the value of the debtor’s interest in the property to determine whether and to what extent the debtor’s exemption is impaired.” Applying that formula to the husband’s ownership interest of $22,710.00, the court found the lien of $109,588.56 plus the exemption amount of $145,425.00, totaling $255,013.56, exceeded the husband’s interest by $232,303.56. Therefore, the husband could avoid the lien to the extent of his exempt interest in the property. Likewise, the impairment to the wife’s exemption amounted to $186,953.56 and she could avoid the lien to the extent of her exempt interest in the property.

The court granted the debtors’ motions, noting that the lien was “not avoided to the extent it pertains to Debtor Brian David Snyder’s interest in the [wife’s residence], and the judicial lien is not avoided to the extent it pertains to Debtor Amy Kathryn Snyder’s interest in the [husband’s residence].”

Snyder Bankr ND Ohio Sept 2022

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