Bankruptcy: Bankruptcy Exemption - Sale of Tenants by the Entirety Property

     In the case of In Re Zella, the United States Bankruptcy Court at Alexandria, Virginia ruled that a deed that conveyed the Virginia marital home to the debtor and his wife "as joint tenants with the full common law right of survivorship" created a tenancy by the entirety and proceeds from the sale of the property is exempt from claims on non-joint creditors in Bankruptcy Court.

     In Zella a creditor challenged a claim of exemption. The Bankruptcy Court determined that the key issue of the case was whether, in Virginia, a deed to parties described in the deed as husband and wife, and who are in fact husband and wife, as "joint tenants with the full common law right of survivorship," creates a tenancy by the entirety in accordance with Virginia Code §55-20, and thus makes the property exempt from the claims of non-joint creditors under Bankruptcy Code §522(b)(2)(B). The Bankruptcy Court concluded that the deed in question did create a tenancy by the entireties, notwithstanding the lack of language using those specific words, as the deed specifically contained the language "with the full common law right of survivorship". The Bankruptcy Court cited two Virginia Supreme Court cases which support such a finding: Allen v. Parkey and Burroughs v. Gorman. The Bankruptcy Court ruled that the language in the deed explicitly evidenced the intent to preserve the common-law right of survivorship.