As noted in the attached article, many states that recognize tenants by the entirety provide that a creditor of one spouse cannot attach entireties property. Many of these “full bar” jurisdictions offer this asset protection to real estate and personal property, including bank and brokerage accounts. Is this form of ownership and the protection it affords only available to residents of such full bar jurisdictions?
Example I. Assume a married couple resides in a state not recognizing the tenancy. If this couple owns a vacation home in a full bar state is the vacation home immune from the creditors of only one spouse?
Example II. If the couple opens an account in a full bar jurisdiction and the account by its terms is governed by that full bar jurisdiction, is that account immune from claims by the creditor of only one spouse?
While federal law creates a uniform system over bankruptcies, generally that law does not determine the nature of a debtor’s interest in his or her assets. Usually such a determination is left to state law. Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 918 (1979) (“Congress has generally left the determination of property rights in the assets to state law”):
Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interest should be analyzed differently simply because an interested party is involved in bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a state serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving “a windfall merely by reason of the happenstance of bankruptcy.” Id.
Under the general exemptions available to debtors in bankruptcy, a tenancy by the entirety is exempt “to the extent that such [entireties] interest … is exempt from process under applicable non-bankruptcy law.” Bankruptcy Code, 11 U.S.C. § 522(b)(3)(B) (West 2008).
When dealing with a debtor residing in a jurisdiction that does not, or does not fully, recognize the asset protection aspects of tenants by the entirety property but that debtor holds entirety property in another state, the critical issue becomes which state’s applicable non-bankruptcy law applies? Unfortunately, no uniform rule governs the choice of law selection in bankruptcy:
There has been limited scholarly discussion on choice of law questions in bankruptcy, and despite several opportunities, the Supreme Court has failed to provide a choice of law analysis for bankruptcy cases. As a result, bankruptcy courts lack a uniform and coherent framework for addressing choice of law questions. The current split in the circuits regarding the appropriate choice of law rule in bankruptcy illustrates this lack of guidance. The majority of courts apply the forum state’s choice of law rules, while a minority of bankruptcy courts devise a distinct federal choice of law rule.
The confusion is compounded because the application of the forum state’s choice of law rules potentially means additional variation depending on the state involved. This confusion may be more theoretical than real, as many states follow the Restatement (Second) Conflicts of Laws.
In a minority of jurisdictions, the federal choice of law is used. The federal rule dictates that the law of the jurisdiction with the most significant relationship to the action should apply: “In general, a bankruptcy court’s choice of applicable law requires the exercise of an informed judgment in the balancing of all of the interests of the states with the most significant contacts in order best to accommodate the equities among the parties to the policies of those states.”  The Bankruptcy Code provides two alternative plans of exemption. Under § 522(b)(2), a debtor may elect the specific federal exemptions listed in § 522(d) (“federal exemptions”) or, under § 522(b)(3) may choose the exemptions permitted, inter alia, under state law and general (non-bankruptcy) federal law (“general exemptions”). In Re Brannon, 76 F.3d 170, 174 (3d Cir. 2007). If a state has opted out of the federal exemptions, it must use the general exemptions. Jackie Gardinia, “The Perfect Storm: Bankruptcy, Choice of Law, and Same-Sex Marriage,” 86 Boston Univ. L. Rev. 881, 884 (2006). Gardinia references Bianco v. Erkins (In Re Gaston & Snow), 243 F 3d 599 (2d Cir. 2001) for a discussion of the basis for the majority rule of applying the forum state’s rules and the arguments for a uniform federal rule. Bianco adopted the forum state approach.  In Re Segre’s Iron Works, Inc., 258 B.R. 547, 551 (Bankr. D. Conn. 2001); also see In Re Standwich Financial Services Corp., 317 B.R. 224 (Bankr. D. Conn. 2004).
2. “Restatement” (Classification)
As noted, most states look to the Restatement (Second) of Conflicts of Laws in framing their choice of law discussion. The Restatement treatment generally depends on the classification of the property rights being effected:
The Restatement of the Law 2d, Conflicts of Law, classifies property according to whether it is ‘movable’ or ‘immovable.’ See Restatement of the Law 2d, Conflicts of Law (1971) 62-65, Introductory Note. ‘Immovables’ refers to real property and ‘movables’ refers to all things, tangible or intangible, that are not immovables. Id. Thus, property, for conflicts purposes, is classified in this manner rather than as ‘personal’ and ‘real.’ Sedler, Across State Lines: Applying the Conflict of Laws to Your Practice (1989) 86, fn. 34. Aside from the differences in nomenclature, these categories correspond to the usual notions of realty and personalty.
3. “Immovables” (Real Estate)
The Restatement rule for immovable (real property) is that the law of the situs shall be applied: “[Whenever] a conveyance transfers an interest in land and the nature of the interest transferred are determined by the law that would be applied by the courts of the situs.”
In Re Holland, 366 B.R. 825 (Bankr., N.D. Ill. 2007), an Illinois debtor sought to exempt entireties property located in Florida. The Florida property was not her residence and Illinois law only recognizes entireties in the homestead. Florida, on the other, had no such restriction.
The Holland court determined that the “applicable non-bankruptcy law” of Bankruptcy Code § 522(b)(3)(B) must mean one of three things:
(1) that the court must apply the choice of law rules of the forum state to determine which law applies;
(2) that the law of the situs of the property must apply;
(3) that the federal choice of law rules determines which state law to apply.
The court held that Illinois choice of law rules dictate that law of the state of the situs of the real property controls. Illinois relies on the Restatement (Second) of the Conflict of Laws to the effect that” it is a firmly established principle that questions involving interests in immovables are governed by the law of the situs.” The Bankruptcy Court in Holland pointed out that the federal rule would reach the same result: “which created Holland’s interest in the land will determine its fate upon the dissolution of his marriage (a divorce was pending) has the most significant relationship to the dispute.” Thus both the Illinois conflict of law test (relying on the Restatement) and the federal common law test both would apply Florida law to determine the status of the property interests.
Interestingly, the same Illinois Bankruptcy Court (but a different judge) decided a similar case differently a year before. In Re Giffune, 343 B.R. 883 (Bankr. N.D. Ill 2006) the debtor owned his Illinois homestead with his non-debtor spouse and also held several Michigan properties with her as tenants by the entirety. The Giffune court only permitted an exemption for the Illinois homestead ruling that the “applicable non-bankruptcy law” means the law of the debtor’s domicile because the state exemption statute expressly limits the debtor’s claims to exemptions. To permit an additional exemption because of the out-of-state entireties property was seen as an expansion of the limited exemptions permitted by Illinois law. The Holland court stated that this position, as a matter of statutory interpretation, is” untenable.”
Other courts have followed the law of the situs rule in accordance with the Restatement. In an unreported case, a Pennsylvania resident claimed exemptions for two parcels of real estate owned with his wife: their principal residence in Pennsylvania and a vacation home in Maine. Although Pennsylvania law recognizes tenants by the entirety, Maine ceased so recognizing such a tenancy in 1844. The exemption for the vacation home was denied. In Re Peters, 2003 WL 22331899 (Bankr. E.D. Pa. 2003) (unreported). Likewise a Minnesota bankruptcy court held that the situs of the property is determinative for Bankruptcy Code § 522(b)(2)(B) purposes:
The use of the conjunction ‘and’ between the two subdivision of § 522(b)(2) shows that Congress intended to allow debtors to cumulate the protections that might be available under the two different sources described in them. Of the two sources, only one is keyed into the situs of the debtor’s pre-petition domicile-that under § 522(b)(2)(A), which includes federal statutes outside the Bankruptcy code, and state or local statute, judicial decision, or other ‘law.’ The other one – the one that the Debtor invokes in this case – is not so limited; § 522(b)(2)(B) contains no provision limiting the governing ‘applicable nonbankruptcy law’ to that of the debtor’s state of domicile. In wording § 522(b)(2)(B) this way, Congress clearly chose to identify the protected class of property by two characteristics: its legal form of ownership, and the existence of protection ‘under applicable nonbankruptcy law’ for assets held in such forms of ownership. Insofar as the latter characteristic in concerned, the situs of the debtor’s domicile is irrelevant. It indeed seems to be just as the Debtor’s counsel argues: the situs of the asset that is held by a debtor in bankruptcy as a tenant by the entireties is the sole determinant of whether § 522(b)(2)(B) can protect it from the claims of the bankruptcy estate.
 Restatement (Second) Conflicts of Laws, § 223(1) (emphasis added).
 Lake Country Trust Co. v. Two Bar B, Inc., 606 N.E.2d 258, 262 (1992). Lake Country is cited by the Holland court as to the Illinois general rule.
 In Re Cochrane, 178 B.R. 1011, 1019-20 (Bankr. D. Minn. 1995).
The second classification of property recognized by the Restatement consists of “movables.” This category embraces both tangible and intangible property. The choice of law rules governing movables under the Restatement include a specific rule for movables acquired during the marriage:
§ 258. Interests in Movables Acquired during Marriage
(1)The interest of a spouse in a movable acquired by the other spouse during the marriage is determined by the local law of the state which, with respect to the particular issue, has the most significant relationship to the spouse and the movable under the principles stated in § 6.
(2) In the absence of an effective choice of law by the spouse, greater weight will usually be given to the state whether the spouses were domiciled at the time the movable was acquired than to any other contact in determining the state of the applicable law.
The cross-reference to § 6 means both sections must be reviewed to determine the law governing movables. Unfortunately, in the absence of a statute, § 6 appears somewhat open-ended:
§ 6. Choice-of-Law Principles
(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.
(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include
(a) the needs of the interstate and international systems,
(b)the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g)ease in the determination and application of the law to be applied.
The approach taken by § 258 and § 6 has three notable aspects: (i) it recites a general rule akin to the federal choice of law rule – the place that “has the most significant relationship to the spouses and the movable; (ii) it strongly suggests that the couple may designate what law is to govern, and; (iii) it gives great weight to the domicile of the couple when the property was acquired absent an affirmative choice by them.
5. Movables (Tangible Property)
Applying these rules to tangible personal property is straightforward. Assuming no evidence of title indicating “an effective choice of law” made by the couple, the domicile at acquisition would seem to control.
In Blackwell v. Lurie, 71 P.3d 509 (N.M. 2003), the New Mexico court, a jurisdiction that does not recognize the tenancy, applied Missouri law, which did recognize the tenancy, to protect art work acquired by the couple while living in Missouri. Likewise In Re Kirshner, (unreported), 2007 WL 3232258 (Bankr. S.E. Fla.) held that household goods and furnishings were not exempt as tenants by the entirety property because they were acquired when the couple lived in New Jersey. The fact that the couple took the property with them when they moved to Florida did not convert the property to entireties property because the tenancy requires the various “unities” one being the unity of time when the property was acquired therefore making the title to the property determined under the law of the domicile when acquired.
6. Movables (Accounts)
Although bank and brokerage accounts are contracts between an account holder and a financial institution, the conflict of law issue is the nature of the debtor’s interest which is not a contract issue but a property law issue:
[I]n determining whether the Eaton note proceeds were subject to attachment and execution by the respondent to satisfy its judgment against the appellant, we must decide the nature of the appellant’s interest in these proceeds. In that regard, it is undisputed that under Missouri law if he owned them with Ms. Russell (his wife) by the entireties they were not subject to attachment and execution. The “legal relationship between a person and a thing” is a matter of property law.
It follows therefore that one applies the rules governing interest in property and not the Restatement provision governing contractual rights.
In Farmers Exchange, the couple were Kansas domiciliaries when they received a note payable to them. The couple owned and operated a Missouri corporation doing business in Missouri. The company borrowed funds from a Missouri bank and the husband, but not the wife, guaranteed the loan. The issue was whether the note payable to the couple was held tenants in common or tenants by the entireties. Kansas, the state of domicile of the note holders, does not recognize entireties. Missouri, the place with most of the contacts associated with the debt, on the other hand recognizes entireties in both real estate and personal property and would not permit attachment.
Applying § § 258 and 6 of the Restatement, the Farmers Exchange court held Kansas law applied because it is the law of the domicile: “Except in rare circumstances, the state will be the state where the spouses were domiciled at the time the movable was acquired.”
Section 258(2), however, reads: “In the absence of an effective choice of law by the spouses, greater weight will usually be given to the state [where] the spouses were domiciled at the time the movable was acquired …” In other words, the plain text of § 258 suggests that spouses may pick which state law governs as long as a sufficient nexus exists so as not to offend § 6 of the Restatement.
The choice of law provision in an account agreement was a determining factor in High v. Balun, 943 F.2d 323 (1991) resulting in the application of the non-domiciliary state law to determine the nature of the account. In that case, a Pennsylvania couple took money from a Pennsylvania entireties account and purchased a CD in a New Jersey bank. The CD was subject to the New Jersey multiple party account rules. Those rules, per New Jersey law, stated that the parties “and their creditors” would be bound by the New Jersey act. The court side-stepped the conflict of laws issue because it held that both Pennsylvania and New Jersey would recognize that the New Jersey multiple party account act would govern. The result in High v. Balun was pro-creditor because New Jersey did not protect entireties. Nevertheless, the implication is that an account in a strong entireties state, would be controlled by that state’s laws instead of by the domicile of the couple.
In Re McNeilly, 349 B.R. 576 (Bankr. R.I. 2000), involved a Rhode Island debtor who successfully exempted an account in a Vermont bank (Rhode Island does not recognize the tenancy but Vermont does). In that case, the court noted that the exemption of § 522(b)(2)(B) of the Bankruptcy Code protecting entirety property is not “‘keyed into the situs of the debtor’s pre-petition domicile,’ in this case Rhode Island, but is determined by ‘the situs of the asset that is held by a debtor in bankruptcy as a tenant by the entireties.'”
In Re Goldstein, 66 B.R. 909 (Bankr. W.D. Pa. 1986), the court applied the forum state’s conflict of laws rule to determine which state, Pennsylvania or New Jersey, had the most significant contacts for its laws to apply. In that case, the property held by the spouses was a note and mortgage with the greatest connection with New Jersey: the secured property was located in New Jersey, the note negotiated there and the creditor was a New Jersey corporation. The sole connection with Pennsylvania was a domicile created after the note and mortgage were in existence for several years.
In National Bank of Arizona v. Moore, 122 P.3d 1215 (N.M. 2005) the issue was which community property rule applied to the garnishment of a New Mexico account established by an Arizona couple. Under New Mexico law the account could be garnished but under Arizona community property law it could not be garnished. In that case, the court rejected the argument that the Restatement would apply the laws of domicile to property acquired during marriage. Instead the court held that once the Arizona judgment was domesticated then the law of the state where it was domesticated applies (the forum state). The rule of this case means that the situs for garnishment purposes (generally the state where the financial institution is located) will govern. That would permit wide-open forum shopping.
The rules governing immovables appears to be fairly straightforward: the situs generally controls. Unlike those rules, the rules governing movables, especially financial accounts, is not as well developed and is somewhat conflicting. Thus, to address the two examples set forth at the beginning of this paper, the following answers are suggested: the answer to Example I is “probably” and the answer to Example II is “maybe.”
 Farmers Exchange Bank v Metro Contracting Services, Inc., 107 S.W.3d 381, 392 (Mo. 2003).
 The husband, in fact, forged his wife’s signature on the guarantee which was, of course, ineffective as to her liability. At the time of the appeal, not surprisingly the wife had secured a divorce.
 Farmers Exchange at 393 (quoting Comment b to § 258).
 Emphasis added. The text states “whether” instead of “where” but as noted in Farmers Exchange, in context “a mere typographical or clerical error” must have been committed. See Farmers Exchange, footnote 5.
 The husband raised this issue in Farmers Exchange but the choice of law provision related to his guarantee and the loan agreements generating the debt, not the note he and his wife held together as joint tenants that the creditor wanted to attach.
 Indeed, most cases state that New Jersey does not recognize tenancy by the entirety. As noted in the attached article, however, this is somewhat confusing because a New Jersey statute seems to state that New Jersey recognizes entireties personal property.
 The McNeilly court was quoting In Re Cochrane, 178 B.R. 1011, 1020 (Bankr. D. Minn. 1995), a case involving real estate. McNeilly applied this principle to the bank account without a discussion of the why the situs of the bank account was “located” at the location of the bank.