Bankruptcy – Exemption of Contingent Future Interests

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7^th Circuit Court of Appeals

Case Name: Scott N. Jaffe v. Laverne Williams

Case No.: 18-2726

Officials: BAUER, HAMILTON, and BRENNAN, Circuit Judges.

Focus: Bankruptcy – Exemption of Contingent Future Interests

Section 522(b)(1) of the United States Bankruptcy Code states that a “debtor may exempt from property of the [bankruptcy] estate the property listed in either paragraph (2) or, in the alternative paragraph (3).” At issue in this case is paragraph (3) subsection (B), which states, in full, that: Property listed in this paragraph is 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.

11 U.S.C. § 522(b)(3)(B). We must determine to what extent contingent future interests created by Illinois law are exempt under this section. The most natural reading of 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. The district court found that any interest held by the debtor is exempt to the extent that state law exempted the entirety interest. We reverse the district court and hold that the debtor’s property cannot be excluded from the bankruptcy estate.

Reversed and remanded

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.