United States District Court, D. Maryland, Southern Division
MARIA E. CONRAD, Appellant
ROGER SCHLOSSBERG, Appellee.
J. HAZEL United States District Judge
Maria E. Conrad, the Debtor in the underlying bankruptcy case
(the '"Debtor"), appeals the January
A, 2016 order of the Bankruptcy Court, sustaining
the objection to the Debtor's claim of exempt property
filed by Roger Schlossberg. the Chapter 7 Trustee of the
Debtor's bankruptcy estate (the "Trustee").
Oral argument is not necessary to resolve the present appeal.
See Fed. R. Bankr. P. 8013(c); see also
Loc. R. 105.6 (D. Md.). For the reasons that follow, the
Court affirms the Bankruptcy Court's order sustaining the
to tiling for bankruptcy, on August 27. 2009. the Debtor
entered a plea agreement acknowledging her guilt to
conspiracy under 18 U.S.C. § 1349 for her involvement in
a mortgage fraud scheme in Criminal Case No. 09-CR-374-GBL-1
in the United States District Court for the Eastern District
of Virginia. See ECF No. 3-6. As part of her plea
agreement, the Debtor agreed to the entry of a restitution
judgment in the full amount of the losses sustained by the
victims of the fraudulent scheme, Id. at
On December 4. 2009. the Debtor was sentenced to pay. as
restitution, the sum of $838, 004.60 (the
"'Restitution Judgment"). ECF No. 3-7 at 1.
24. 2015. the Debtor filed a Voluntary Petition under Chapter
7 of the Bankruptcy Code. See ECF No. 3-1. Among her
debts, the Debtor listed the United States of America as an
unsecured creditor holding an undisputed claim for
$838.004.60-the full amount of the Restitution Judgment.
Id. at 17. The Parties agree that the United States
has recorded the Restitution Judgment in Charles County,
Maryland. See ECF No. 7 at 6 n.2; ECF No. 12 at 6.
Debtor listed among the assets of her bankruptcy estate
certain real property located in Waldorf. Maryland (the
"Property") which she owns in a joint tenancy by
the entirety with her non-debtor husband. Timothy W. Conrad.
Id. at 6, 8. The Debtor listed the Property as
having an unencumbered value of $227, 447. id. at 8.
but she claimed the Property as an exempt asset under 11
U.S.C. § 522(b)(3)(B). id. at 12.
August 25. 2015. the Trustee filed an objection to the
Debtor's claim of exempt property, in which he argued
that the Property was not exempt from administration by the
Trustee to satisfy the Restitution Judgment entered against
the Debtor. ECF No. 3-2. The Debtor filed an opposition to
the Trustee's objection on September 22. 2015. as well as
a supplemental memorandum on December 5. 2015. ECF Nos. 3-18.
December 21. 2015, the Bankruptcy Court held a hearing on the
Trustee's objection. see ECF No. 3-28 at 3. and,
on January 4, 2016. issued a memorandum opinion and order
sustaining the Trustee's objection. ECF Nos. 3-25. 3-26;
see also In re Conrad. 544 B.R. 568, 571 (Bankr. D.
Md. 2016). On January 19. 2016. the Debtor filed a Notice of
Appeal from that Order in this Court. ECF No. 1.
STANDARD OF REVIEW
Court hears this bankruptcy appeal under 28 U.S.C. §
158(a). Parties of bankruptcy cases can appeal orders that
dispose of discrete disputes within the larger case. See
Mori Rama v. Gorman, 721 F.3d 241. 246 (4th Cir, 2013).
In this case, the Property exemption issue is appealable as
it was completely resolved by the Bankruptcy Court.
Bankruptcy appeals "shall be taken in the same manner as
appeals in civil proceedings generally are taken to the
courts of appeals from the district courts." 28 U.S.C.
§ 158(c)(2). On appeal from the Bankruptcy Court, this
Court reviews the Bankruptcy Court's findings of fact for
clear error and conclusions of law de novo. See In re
Merry-Go~Round Enterprises, Inc., 400 F.3d 219. 224 (4th
Cir. 2005): In re Kielisch, 258 F.3d 315. 319 (4th
541 of the Bankruptcy Code defines the property of a debtor
that becomes the property of the bankruptcy estate as
including "all legal or equitable interests of the
debtor in property as of the commencement of the case."
11 U.S.C. § 541 (a)(1). A debtor may exempt certain
property from the bankruptcy estate, however, in accordance
with Section 522 of the Bankruptcy Code. Pursuant to that
section, where a debtor's property is held as "an
interest as a tenant by the entirety or joint tenant."
that property is exempt from process in a bankruptcy
proceeding "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. §
Maryland law. where the Debtor's property is located, a
debtor's creditors cannot "levy upon nor sell a
debtor's undivided interest in entireties property to
satisfy debts owed solely by the debtor." In re
Bell-Breslin, 283 B.R. 834. 837 (Bankr. D. Md. 2002):
see also Schlossberg v. Barney. 380 F.3d 174. 178
(4th Cir. 2004) (citing Bruce v. Dyer. 524 A.2d 777.
781 (Md. 1987)) ("While both spouses are alive, a
tenancy by the entireties may only be severed by divorce or
joint action by both spouses."). Thus, in an ordinary
case applying Maryland law as "applicable nonbankruptcy
law." there is no question that entireties property may
be exempted from the bankruptcy estate. See Barney.
380 F.3d at 178.
however, the Trustee argues that because a restitution
judgment was entered against the Debtor, making the United
States a creditor of the bankruptcy estate, the Property is
not exempt from process. See ECF No. 12 at 10-14. In
support of his position, the Trustee relies principally on
United Stales v. Craft.535 U.S. 274. 122 S.Ct. 1414
(2002). in which the United States Supreme Court held that,
pursuant to 26 U.S.C. § 6321, a federal tax lien can
attach to property held in a tenancy by the entirety to
satisfy the debt of only one spouse. See ECF No. 12
at 11-16. Under § 6321. "[i]f any person liable to
pay any tax neglects or refuses to pay the same after demand,
the amount. . . shall be a lien in favor of the United States
upon all property and rights to property, whether real or
personal, belonging to such person." In
('raft, the Court considered whether a
husband's interest in entireties property constituted
"property" or "rights to property" for
purposes of § 6321. See Craft. 535 U.S. at 278.
The Court initially observed that $ 6321 "itself creates
no property rights but merely attaches consequences,
federally defined, to rights created under state law."
Id. The Court accordingly began its analysis by