In the

United States Court of Appeals

For the Seventh Circuit

No. 18-2726

IN RE: SCOTT N. JAFFE,

Debtor-Appellee,

APPEAL OF: LAVERNE WILLIAMS.

Appeal from the United States District Court for the 

Northern District of Illinois, Eastern Division.

No. 17 C 04662 — John J. Tharp, Jr., Judge.

ARGUED FEBRUARY 7, 2019 — DECIDED AUGUST 5, 2019

Before BAUER, HAMILTON, and BRENNAN, Circuit Judges.

BAUER, Circuit Judge. 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
2 No. 18-2726

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.

I. BACKGROUND

In 1998, Laverne Williams wanted to file a medical malpractice lawsuit and hired Scott Jaffe to be her attorney. The statute

of limitations expired before Jaffe filed a complaint and

Williams sued for legal malpractice, obtained a default

judgment, and recorded that judgment on a property that Jaffe

and his wife owned as tenants by the entirety. Williams now

claims post-judgment interest brings her total claim against

Jaffe to $1.04 million.

Jaffe filed a chapter 7 bankruptcy petition in November

2015, which identified his debt to Williams and indicated 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, but before bankruptcy proceedings were

complete Jaffe’s wife died. According to Illinois law, when his

wife died the tenancy by the entirety terminated and Jaffe held
No. 18-2726 3

the property individually in fee simple. To avoid the judgment

lien Jaffe filed a motion in the bankruptcy court arguing the

property was exempt under 11 U.S.C. § 522(b)(3)(B). Williams

responded that the property was not exempt because the

federal bankruptcy provision that Jaffe relied upon looks to

state law to determine whether a tenancy property is exempt.

Because Illinois does not exempt contingent future interests,

Williams argued, the federal bankruptcy statute does not allow

Jaffe to exempt the property from the bankruptcy estate. On

appeal the parties renew these arguments.

II. DISCUSSION

We must first determine whether a lien exists and what

interests it attached to. If no lien exists the debtor cannot seek

an exemption under 11 U.S.C. § 522(f) and our inquiry is

complete. See In re Chinosorn, 243 B.R. 688, 694 (Bankr. N.D. Ill.

2000) (noting there are “three elements for lien avoidance: (1) a

lien must have fixed on an interest of the debtor in property,

(2) the lien must impair an exemption to which the debtor

would have been entitled under § 522(b), and (3) the lien must

be a judicial lien—with the debtor bearing the burden of each

element.”). If a lien attached we must also determine to what

interests it attached. Jaffe argues that, if any lien exists, it

attached only to his tenancy interest which is exempt under

Illinois law. Williams asserts her lien attached to Jaffe’s

contingent future interest in the property. If we determine a

lien attached to a property interest we must then determine

whether that interest is exempt under § 522(b)(3)(B). We will

address each issue in turn.
4 No. 18-2726

A. The Existence of a Lien

If a judicial lien attaches to property that is entitled to

exemption from the bankruptcy estate, § 522(f) allows the

debtor to avoid the fixing of the lien. See 11 U.S.C. § 522(f).

Illinois courts have not decided whether a judgment lien

attaches to the individual interests (in particular contingent

future interests) of a tenant by the entirety. Where a state’s

highest court has not ruled on an issue, we must apply the law

in a manner we believe the state supreme court would, if

presented with the issue. Liberty Mut. Fire Ins. Co. v. Statewide

Ins. Co., 352 F.3d 1098, 1100 (7th Cir. 2003). 

To answer this question we turn to the applicable Illinois

statutes, which have long controlled the attachment of judgment liens. Lehman v. Cottrell, 19 N.E.2d 111, 114 (2d Dist. 1939)

(“At common law, land was subject neither to execution nor to

the lien of a judgment. Both these results are purely statutory.”). Section 12–101 of the Illinois code creates judgment

liens and controls their ability to attach to certain property

interests. The statute dictates that judgment liens may attach to

all “real estate” and defines “real estate” broadly to include all

“lands, tenements, hereditaments, and all legal and equitable

rights therein.” 735 ILCS 5/12–105.

The Illinois legislature enumerated the precise interests

tenants by the entirety enjoy individually, including the

following contingent future interests: “(a) an interest as a

tenant in common in the event of a 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.” 765 ILCS 1005/1c. These
No. 18-2726 5

contingent future interests fall within the statute’s broad

definition of “real estate.” Therefore, a judgment lien attaches

to these individual interests, absent some exception. See In re

Tolson, 338 B.R. 359, 369 (C.D. Ill. 2005). The only exception that

12-101 identifies is section 12-901—the homestead exception.

See 735 ILCS 5/12-901 (the “homestead and all rights in and

title to that homestead is exempt from attachment, judgment,

levy or judgment sale for the payment of his or her debts or

other purposes ... .”).

Otherwise, “where the Illinois legislature has determined

that a judgment lien should not be created as to a debtor’s

interest in particular property, it has provided that

the property is ‘exempt from judgment,’ see 735 ILCS 5/12-1001

(specified personal property), or that it is not ‘subject to any

lien,’ see 820 ILCS 305/21 (workers’ compensation award).”

Chinosorn, 243 B.R. at 695–95. But Illinois does not “exempt

from judgment” interests held in tenancy by the entirety or

contingent future interests held by tenants by the entirety.

Illinois law merely exempts the tenancy interest from the

attachment of a judgment lien. 735 ILCS 5/12-112. Section 12-

112 provides that judgment liens may attach to all “lands,

tenements, goods and chattels.” It then carves out a narrow

exception, the tenancy interest, without mentioning the

contingent future interests explicitly created by the Illinois

legislature. 

It is clear that if the Illinois legislature wanted to exempt

particular interests from the attachment of judgment liens, it

had no problem in doing so. Because the Illinois legislature

failed to do so, we find that Williams’s judgment lien attached

to Jaffe’s contingent future interest in the property. See Yotis,
6 No. 18-2726

518 B.R. at 486–90; Tolson, 338 B.R. at 367 (holding that “the

contingent right of survivorship of each entireties tenant is a

present property right to which a judgment lien extends.”). 

B. Exemption Under § 522(b)(3)(B)

Tenancy by the entirety is a form of property ownership

that arose out of common law and developed as part of the

English feudal system. Oval A. Phipps, Tenancy by the Entireties, 25 Temp. L.Q. 24 (1951). Until the nineteenth century,

married women in the United States were subject to coverture.

This meant a wife’s legal identity and property were absorbed

by her husband and he was granted legal dominion over

everything. Id. Therefore, if a married couple purchased

property, it could not be owned by the husband and wife

because both spouses were considered a single legal entity (the

husband). Id. Tenancy by the entirety was created so spouses

could own property jointly and upon the death of one spouse

the property would belong to the surviving spouse. Then,

“during the middle and latter part of the nineteenth century,

as part of a reform movement aimed at emancipating married

women from their state of social and economic dependency,

the Married Women’s Property Acts were enacted practically

universally by the legislatures of the several states.” Id.

Following the passage of the Married Women’s Property

Acts, states splintered in their approach to tenancy by the

entirety. Many state courts thought the acts destroyed tenancy

by the entirety and a few courts held they were unaffected;

several state courts gave both spouses the rights of the husband under common law and a large number of states found

both spouses had only the limited interests a wife previously
No. 18-2726 7

had under common law. Chinosorn, 243 B.R. at 692–93 (collecting cases). States also divided over whether tenancy by the

entirety encompassed real property and personal property, or

just real property. Id. at 693. The Illinois judiciary found that

the state’s Married Women’s Act abolished tenancy by the

entirety but, in 1990, the legislature codified tenancy by the

entirety for real estate owned by spouses who were using the

property as their homestead. 765 ILCS 1005/1c.

Jurisdictions that recognize tenancy by the entirety,

however, are not uniform in their approach to creditors’ rights

against the estate: 

A creditor’s right to levy on a married person’s

property is complex, and varies by state and the

type of debt and property. Every state allows

satisfaction of a debt which has been jointly

incurred by a husband and wife against jointly

held property, even if that property is held in a

tenancy by the entirety ... . Some states allow

the satisfaction of an individual spouse’s debt

against entireties property, but most do not.

Creditors’ Rights Against Entireties Property In and Out of

Bankruptcy, 1983 Ann. Surv. of Bankr. Law Part II (September

1983). With this kaleidoscopic background in mind, we turn

to the bankruptcy aspect of this case.

A debtor’s bankruptcy estate must include “all legal or

equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a). This includes an

individual debtor’s interest in property held as a tenant by the

entirety. In re Hunter, 970 F.2d 299, 303 (7th Cir. 1992); Napotnik
8 No. 18-2726

v. Equibank & Parkvale Savings Association, 679 F.2d 316 (3d Cir.

1982). All property in the estate is liquidated by the bankruptcy

trustee and the proceeds are distributed to creditors based on

their priority. 11 U.S.C. § 704. But the Bankruptcy Code allows

debtors to exempt certain estate property. Exempt property is

removed from the estate and retained by the debtor.

Section 522(b)(3)(B) exempts:

[a]ny interest in property in 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.

The law of co-tenancies is almost exclusively a matter of state

law since there is no general federal property law, therefore,

the “applicable nonbankruptcy law” is Illinois law. The

question here is to what extent § 522(b)(3)(B) exempts Jaffe’s

contingent future interest in the tenancy property. There is no

dispute that a lien that attached to Jaffe’s tenancy interest would

be exempt. However, the nub of this case lies in the exemption

of the lesser interests that are not exempted under Illinois law.

The district court interpreted § 522(b)(3)(B) to exempt

Jaffe’s contingent future interest in the entireties property,

despite the fact that Illinois provides no exemption for these

interests. In reaching this conclusion the district court partitioned the statutory language into four elements: 

§ 522(b)(3)(B) exempts: (i) any interest in property; (ii) in which the debtor had an interest as a
No. 18-2726 9

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.

Jaffe v. Williams, No. 1:17-cv-4662, slip op. at *4 (N.D. Ill.

May 22, 2018). The district court noted that Jaffe had an interest

as a tenant by the entirety (as well as contingent future

interests) at the time the bankruptcy petition was filed (satisfying the first three elements). The district court then concluded

that any interest he held (contingent future interests included)

was exempt to the extent that the tenancy interest was exempt

under Illinois law. And since Illinois exempts the tenancy

interest, more specifically the forced sale of the tenancy

property to collect a debt against just one tenant, all other

interests Jaffe had as a tenancy by the entirety were exempt

completely.

But the fourth element of the district court’s analysis left

out a key word—“such.” Section 522(b)(3)(B) exempts certain

interests “to the extent that such interest as a tenant by the

entirety” is exempt under state law. By not giving sufficient

weight to the word “such,” the district court interpreted the

statute to mean that any property interest is exempt to the

extent that the entirety interest is exempt. But identifying what

“such” refers to is the main interpretive issue in this case. If

“such” refers just to “any interest,” as Jaffe argues, the district

court’s conclusion is correct because the statute would exempt

“any interest” the debtor had to the extent that any tenancy

interest is exempt from state law. However, if “such interest”

refers to something more limited, like the precise interests the
10 No. 18-2726

debtor was seeking to exempt, the district court’s interpretation is incorrect.

Section 522(b)(3)(B) begins broadly by stating it exempts

“any interest in property.” The provision goes on to state that

the debtor must have an interest in the property “as a tenant by

the entirety” in order to claim an exemption, thus cabining “any

interest in property.” This means that if, for example, a tenant

by the entirety transferred her interest in the income the

property generated, the transferee could not claim an exemption under § 522(b)(3)(B) since she does not hold the interest as

a tenant by the entirety. The provision goes on to state that the

exemption applies “to the extent that such interests as a tenant

by the entirety,” meaning the precise interests that the debtor

holds as a tenant by the entirety, are exempt under state law. 

We read this provision to establish two things. First, the

opening language indicates the interests that may qualify for

exemptions—any interest the debtor has, so long as she holds

that interest as a tenant by the entirety. The provision then

defines which of those qualifying interests are exempt—all of

the debtor’s qualifying interests to the extent that they are

exempt under applicable nonbankruptcy law. Our reading of

the statute yields a simple result—interests a debtor holds as

a tenant by the entirety are exempt to the extent that those

interests the debtor holds as a tenant by the entirety are exempt

under state law. 

The statutory language does not support the argument that

“such interest as a tenant by the entirety” is referring more

broadly to “any interest in property” as Jaffe argues. It is much

more sensible to read “such interest” as referring to the
No. 18-2726 11

complete introductory phrase, which identifies the debtor’s

specific interests that potentially qualify for an exemption.

Additionally, the signifier (“such interest”) and referent

(“interest as a tenant by the entirety”) use mirroring language

indicating that the latter is referring to the former: “property in

which the debtor had ... an interest as a tenant by the entirety ...

to the extent that such interest as a tenant by the entirety” is

exempt. This buttresses the conclusion that “such interest” was

meant to refer to the specific interests that the debtor held as a

tenant by the entirety, rather than only referring to “any

interest.”

Given the variety of rights, interests, and exemptions in

tenancy by the entirety, it is likely that Congress enacted

§ 522(b)(3)(B) to reflect the full spectrum of different approaches states have taken. See Chinosorn, 243 B.R. at 700 (“the

apparent intent of the provision is to provide, in bankruptcy,

a level of protection from claims of creditors identical to the

protection that owners of entireties property would have in

collection proceedings outside of bankruptcy, under applicable

state law.”). “Any interest in property in which the debtor

had ... an interest” is broad, inclusive language that signals

that all state exemptions for tenants by the entirety will be

honored in federal bankruptcy court. But the district court’s

reading would mean that no matter how nuanced state

exemptions for tenants by the entirety are, all interests would

be exempt if the state exempts the entirety interest. This means

that if Illinois decided to explicitly exempt the contingent

future interests that Williams’s lien attached to, such an

exemption would be given no effect by a bankruptcy statute
12 No. 18-2726

that relies on state law. This interpretation leads to an absurd

result and could not be what Congress intended.

Additionally, our reading of the statute is in line with each

of our sister circuits that have considered the issue. While it

does not appear that those cases involved arguments by the

parties that required similar exegesis of the statutory text, the

fact that the no party argued otherwise implies that the statute

is naturally read as we read it today. See e.g., In re Arango, 992

F.2d 611, 613 (6th Cir. 1993) (“[W]e must first look to Tennessee

law to classify Arango’s interests in entireties property. We

then determine which of those interest is exempt from his

bankruptcy estate by determining whether each particular

interest is subject to execution under Tennessee law” (emphasis

added)); Ragsdale v. Genesco, Inc., 674 F.2d 277, 239 (4th Cir.

1982) (“The phrase ‘to the extent such interest ... is exempt

from process under applicable nonbankruptcy law’ is of

decisive importance. If the Ragsdales’ residential real property

could be reached to satisfy a state court judgment in Virginia,

it could not be successfully claimed as exempt”); Napotnik v.

Equibank & Parkvale Sav. Ass’n, 679 F.2d 316 , 322–23 (3d Cir.

1982) (“Since the debtor’s interest in the real property owned

with his wife as tenants by the entirety is not exempt from

process in Pennsylvania because they are joint obligors, he is

not entitled to exempt that portion of his equity subject to

Equibank’s judicial lien, and cannot avoid that lien under

Section 522(f)”).

Here, Williams obtained a judgment lien on Jaffe’s contingent future interest that existed when Jaffe filed his bankruptcy

petition. The first determination that must be made is whether

Jaffe’s interest is the kind that potentially qualifies for an
No. 18-2726 13

exemption under § 522(b)(3)(B). Any interest can qualify so

long as it is an interest one holds “as a tenant by the entirety.”

Jaffe held his interest as a tenant by the entirety so we must

determine whether the interest is exempt. This requires looking

to Illinois law to determine whether contingent future interests

are exempt from process. 

The main protection that Illinois law provides tenants by

the entirety is that a creditor is unable to force the sale of the

property to collect a debt against only one of the tenants. 735

ILCS 5/12-112 (2014). Illinois law does not make all interests

held by tenants by the entirety immune from process and we

need not look hard for a state that does—Indiana law exempts

“any interest the judgment has in real estate as a tenant by the

entireties.” Ind. Code § 34-2-28-1(a)(5); In re Paeplow, 972 F.2d

730, 737 (7th Cir. 1992). Illinois law explicitly refuses to exempt

income from entirety properties and fails to provide an

exemption for the contingent future interests. 765 ILCS 1005/1c;

see also Yotis, 518 B.R. at 489–90 (holding that “any future

interest that may be held by either tenant alone, such as the

contingent future interest, is not exempt at all”). Accordingly,

we find that Jaffe is not entitled to an exemption of his contingent future interest. The district court’s conclusion otherwise

was erroneous.

III. CONCLUSION

Because the statute exempts an individual’s tenancy

interest to the extent that state law exempts that interest, we

reverse the decision of the district court and remand for further

proceedings consistent with this opinion.