Opinion

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF MISSOURI

In re: )

) Case No. 25-60046

Nathaniel Spencer Lyne and )

Hallee Nicole Lyne, ) Chapter 13

)

Debtors.

OPINION AND ORDER GRANTING

TRUSTEE’S MOTION TO DENY CONFIRMATION

Today’s question is whether the first amended chapter 13 plan proposed by

debtors Nathanial and Hallee Lyne, Dkt. No. 49, satisfies the mandate under 11

U.S.C. § 1325(a)(4) that unsecured creditors receive under the plan at least the

present value of what they would have received in a hypothetical chapter 7

liquidation of the debtors’ estate, colloquially called the “best interest of creditors

test.” The chapter 13 trustee believes the plan does not satisfy that test because he

avoided, as a preferential transfer, a purchase-money security interest in a 2024

Toyota Sienna that the Lynes own as tenants by the entirety; the Lynes do not and

cannot claim any exemption, including the tenancy by the entirety (TBE) exemption,

in the Sienna under § 522(g); and the plan does not provide for the payment of the

Sienna’s value—approximately $39,000—to the Lynes’ individual unsecured

creditors. The Lynes believe the plan satisfies the best interest of creditors test

because it proposes to pay all their joint creditors in full, and individual unsecured

creditors are not entitled to the Sienna’s value because the Lynes own it as tenants

by the entirety.

Answering the question requires the court to navigate the intersection of

bankruptcy law—specifically, the inclusion and treatment of TBE property in the

bankruptcy estate—and the protection of TBE property from individual creditors

under Missouri law.1

For the reasons explained below, the court agrees with the trustee that the

plan fails the best interest of creditors test and cannot be confirmed. Therefore, the

court GRANTS the trustee’s motion to deny confirmation.

BURDEN OF PROOF

The Bankruptcy Code does not expressly state which party has the burden of

proof on whether a chapter 13 plan satisfies the confirmation requirements of

§ 1325(a). Judge Dow wrestled with this question in In re Smith, 328 B.R. 797, 801–

02 (Bankr. W.D. Mo. 2005), and after identifying a split in authority, he opined that

“the better rule is that the debtor has the ultimate burden of proof on a [§ 1325(a)]

issue, with the initial burden of producing a question regarding compliance with

confirmation requirements with the creditor.” Judge Federman seemed to agree in

In re Carey, 402 B.R. 327, 331 (Bankr. W.D. Mo. 2009), when he stated that “it is the

debtor, and not the trustee, who has the ultimate burden of proving that a plan should

be confirmed.” A few years later, Judge Norton weighed in, stating: “In the Eighth

Circuit, courts have generally borrowed the civil rule that the movant bears the

1 Joint creditors are creditors with claims against both debtors, while individual creditors have claims

against only one of the debtors. Under Missouri law, TBE property can be used to satisfy joint claims,

but not individual claims. See Garner v. Strauss (In re Garner), 952 F.2d 232, 234–35 (8th Cir. 1991).

The application of this state law rule in bankruptcy, when a trustee avoids a lien against TBE property

and preserves its value for the benefit of the bankruptcy estate, is the subject of this order.

burden of production on an objection to confirmation. This [rule] means that the

original burden of production on an objection to confirmation rests with the objecting

[party].” In re Williams, No. 16–30243–can13, 2017 WL 2120044, at *9 (Bankr. W.D.

Mo. May 15, 2017) (citing Educ. Assistance Corp. v. Zellner, 827 F.2d 1222, 1226 (8th

Cir. 1987)). Once the objecting party produces evidence in support of its objection,

the burden shifts to the debtor. Id.

Applying this authority, the court determines that the trustee has raised a

valid question under the facts of this case; whether the Lynes’ amended chapter 13

plan satisfies the best interest of creditors test under § 1325(a)(4). The Lynes now

have the burden to prove their plan satisfies that test.

BACKGROUND

The Lynes filed their voluntary chapter 13 bankruptcy petition on January 27,

2025. In their bankruptcy schedules, the Lynes disclosed that they jointly own a 2024

Toyota Sienna worth $39,175, which they pledged as collateral to secure a loan from

Exeter Finance. The chapter 13 trustee discovered that Exeter perfected its lien more

than 30 days after the Lynes acquired the vehicle and within 90 days before the Lynes

filed their chapter 13 petition. So, the trustee filed an adversary complaint seeking

to avoid Exeter’s lien on the Sienna under 11 U.S.C. § 547(b). Exeter and the trustee

subsequently submitted, and the court entered, an agreed order avoiding the lien

under § 547 and preserving the property for the benefit of the bankruptcy estate

pursuant to §§ 550 and 551.

Following the avoidance of Exeter’s lien, the Lynes filed their first amended

chapter 13 plan. The Lynes owe approximately $40,900 to joint unsecured creditors

and roughly $100,000 to individual unsecured creditors. In the amended plan, the

Lynes propose to pay a 100% dividend to their joint unsecured creditors, based on the

$156,095 equity in their jointly-owned TBE residence. The Lynes, however, propose

to pay nothing to their individual unsecured creditors—thus ignoring the equity

gained from the lien avoidance, despite not claiming the TBE or any other exemption

in the Sienna.2

The trustee filed the current motion to deny confirmation of the Lynes’ first

amended plan. The trustee argues that § 522(g) prohibits the Lynes from claiming

any exemption in the Sienna, and because the Sienna is not exempt, its value would

be available to pay individual unsecured creditors in a hypothetical chapter 7

liquidation. But that value is not accounted for in the amended plan. Thus, the

trustee argues that the plan fails the best interest of creditors test under § 1325(a)(4)

and the court must deny confirmation of the amended plan.

Rather than challenge the trustee on the exemption issue, the Lynes argue

that the Sienna’s value is irrelevant to confirmation of their amended plan because

the mere fact that they own the Sienna as tenants by the entirety allows them to

shield its value from their individual creditors, and they already propose to pay their

joint creditors in full due to the significant equity in their TBE home. Thus, the Lynes

2 Initially, the Lynes claimed the Sienna as exempt under Missouri’s $3,000 motor vehicle exemption.

See Mo. Rev. Stat. § 513.430.1(5) (2025). The trustee, however, objected to this claimed exemption,

and the court sustained the objection, Dkt. No. 38, on April 22, 2025. Following the court’s order

sustaining the objection, the Lynes did not, and still have not, claimed any exemption in the Sienna.

argue the first amended plan is confirmable, despite proposing a 0% dividend to

individual unsecured creditors.

The key issue before the court is whether individual unsecured creditors are

entitled to any payment under the plan to account for the equity in the Sienna.

ANALYSIS

The court determines that the Lynes must pay through their plan the non-

exempt value of the Sienna to their individual unsecured creditors. This is so because

the Lynes do not claim any exemption in the Sienna, § 522(g) prevents the Lynes from

claiming an exemption in the Sienna, and a chapter 7 trustee would administer the

non-exempt Sienna for the benefit of all creditors in a hypothetical chapter 7

liquidation. Accordingly, the plan is not confirmable.

I. The Sienna Is Property of the Estate That the Lynes Do Not and Cannot

Claim as Exempt

Section 541 states that the bankruptcy estate includes “all legal or equitable

interests of the debtor in property as of the commencement of the case.” 11 U.S.C.

§ 541(a)(1). It is well established that § 541 brings TBE property into the bankruptcy

estate. See Garner v. Strauss (In re Garner), 952 F.2d 232, 233–34 (8th Cir. 1991).

Moreover, §§ 547 and 551 augment the estate by including property that the

trustee recovers in an avoidance action and preserves as property of the estate.

Section 551 states that the trustee assumes the role of the avoided lienholder and

automatically preserves the equity gained from the lien avoidance for the benefit of

the estate—including the general unsecured creditors. Shubert v. Jeter (In re Jeter),

171 B.R. 1015, 1023 (Bankr. W.D. Mo. 1994); Dewsnup v. Timm, 502 U.S. 410, 422

n.1 (1992) (Scalia, J., dissenting). The Bankruptcy Code provides this automatic

preservation to ensure that junior lienholders or others with interests that might

otherwise precede general unsecured creditors do not reap all the benefits of the lien

avoidance. S. Rep. No. 95-989, at 91 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787,

5877 (“[Section 551] as a whole prevents junior lienors from improving their position

at the expense of the estate when a senior lien is avoided.”).

Section 522 authorizes debtors to exempt specific property from the

bankruptcy estate. Section 522(d) lists the federal exemptions available to debtors.

Missouri, however, is among the many states that have opted out of the federal

exemptions. Benn v. Cole (In re Benn), 491 F.3d 811, 813 (8th Cir. 2007). Thus,

Missouri residents can only elect “exemptions available under Missouri law and

under federal statutes other than . . . § 522(d).” Wallerstedt v. Sosne (In re

Wallerstedt), 930 F.2d 630, 631 n.1 (8th Cir. 1991) (citing Mo. Rev. Stat. § 513.427).

The available federal exemption statutes “other than § 522(d)” include

§ 522(b)(3)(B), which allows a debtor to exempt TBE property to the extent it “is

exempt from process under applicable nonbankruptcy law.” 11 U.S.C. § 522(b)(3)(B).

Under applicable non-bankruptcy law (here, Missouri law), TBE property is exempt

from process by individual creditors. Garner v. Strauss (In re Garner), 952 F.2d 232,

234–35 (8th Cir. 1991). TBE property, however, is not exempt from process by joint

creditors. Id. at 235.

Debtors typically may shield equity in their TBE property from their individual

creditors by claiming this exemption. But when a trustee avoids a preferential

transfer of an interest in a debtor’s TBE property and preserves it for the estate,

§ 522(g) prevents the debtor from claiming an exemption in the recovered property

unless certain prerequisites are satisfied. Section 522(g) states:

[T]he debtor may exempt under [§ 522(b)] property that the trustee

recovers . . . to the extent that the debtor could have exempted such

property under [§ 522(b)] if such property had not been transferred, if—

(1) (A) such transfer was not a voluntary transfer of such property by

the debtor; and

(B) the debtor did not conceal such property; or

(2) the debtor could have avoided such transfer under [§ 522(f)(1)(B)3].

11 U.S.C. 522(g). Courts have consistently interpreted this language to prevent a

debtor from claiming an exemption in recovered property if the debtor voluntarily

transferred the property, concealed the transfer, or could not have avoided the lien

under § 522(f)(1)(B) (e.g., when the lien is possessory or a purchase-money security

interest). In re Hicks, 342 B.R. 596, 598–99 (Bankr. W.D. Mo. 2006). “The purpose

of § 522(g) is to prevent a debtor from claiming an exemption in [recovered] property

which was transferred in a manner giving rise to the trustee’s avoiding powers, where

the transfer was voluntary or where the transfer or property interest was concealed.”

Id. at 599 (quoting Glass v. Hitt (In re Glass), 60 F.3d 565, 568–69 (9th Cir. 1995)).

The Lynes do not and cannot claim an exemption in the Sienna. Here, it is

undisputed that the Lynes own the Sienna as TBE property that is property of the

estate. Not claiming the TBE exemption is arguably dispositive of the Lynes’

3 Section 522(f)(1)(B) states that “the debtor may avoid the fixing of a lien on an interest of the debtor

in property to the extent that such lien impairs an exemption to which the debtor would have been

entitled under [§ 522(b)], if such lien is . . . a nonpossessory, nonpurchase-money security interest.” Id.

(emphasis added).

entitlement to shield the equity in the Sienna from individual creditors.4 Congress

created § 522(b)(3)(B) as the mechanism available to debtors to protect their state-

law TBE interests in bankruptcy. Thus, the Lynes must claim the TBE exemption

under § 522(b)(3)(B) to protect the Sienna, or its value, from administration for the

benefit of their creditors. But here, even if the Lynes had attempted to claim the

§ 522(b)(3)(B) exemption to protect the Sienna from their individual creditors,

§ 522(g) prohibits the Lynes from claiming that exemption because (1) the trustee

avoided Exeter’s lien in the Sienna as a preferential transfer and preserved its value

for the estate, (2) the Lynes voluntarily granted the lien to Exeter, and (3) Exeter’s

lien was a purchase-money security interest that the Lynes could not have avoided

under § 522(f)(1)(B).

Because the Sienna is property of the estate that the Lynes do not and cannot

claim as exempt, the court must next determine if the TBE interest alone is sufficient

to shield the equity in the Sienna from the Lynes’ individual unsecured creditors.

II. Mere TBE Ownership Is Insufficient to Shield Property

Though the Lynes do not claim the TBE exemption and § 522(g) makes it

unavailable, the Lynes argue that the value of the non-exempt TBE property can be

distributed only to joint creditors. The Lynes rely on Missouri’s common-law

tradition of TBE property being unavailable to satisfy individual debts. The Lynes

reason that distributing TBE property to individual creditors “contradicts the ancient

4 See, e.g., Fairfield v. United States (In re Ballard), 65 F.3d 367, 372 n.2 (4th Cir. 1995) (Hall, J.,

dissenting) (“Only when the exemption option has been exercised, however, does [TBE] property stand

available for the satisfaction of only the joint debts.”).

foundational principle of [TBE], which is that neither husband nor wife retain[s] an

individual interest in the property. The ownership interest lies with the marital

unit.”5 Accordingly, the Lynes argue that mere TBE ownership is sufficient to shield

property from individual creditors in bankruptcy. In other words, the Lynes contend

that a debtor may claim an exemption in TBE property under § 522(b)(3)(B), but

exemption is not required because the nature of TBE ownership shields TBE property

from individual creditors, even without of the exemption.

Though the court recognizes the protections afforded to TBE property under

Missouri common law, the court determines that mere TBE ownership, without a

validly-claimed exemption, is insufficient to prevent recovery to individual creditors

in bankruptcy for four reasons.

First, holding that mere TBE ownership is sufficient to shield property would

render § 522(b)(3)(B) superfluous. “It is a cardinal principle of statutory construction

that a statute ought, upon the whole, to be so construed that, if it can be prevented,

no clause, sentence, or word shall be superfluous, void, or insignificant.” TRW Inc. v.

Andrews, 534 U.S. 19, 31 (2001) (internal quotation marks omitted) (quoting Duncan

v. Walker, 533 U.S. 167, 174 (2001)). Section 522(b)(3)(B), which incorporates state

law TBE protections as an exemption in bankruptcy, would serve no purpose if mere

TBE ownership were sufficient to shield TBE property from process by individual

creditors in bankruptcy. Thus, the Lynes’ interpretation of § 522(b)(3)(B) would

render it superfluous. Accordingly, the court rejects their interpretation.

5 Lynes’ Br. 2, Dkt. No. 71, Nov. 21, 2025.

Second, the intersection between bankruptcy and state law does not foreclose

the court’s interpretation because the Bankruptcy Code generally governs the

treatment of property in bankruptcy even when the Code might seem to conflict with

state law. The Constitution grants Congress the sole authority to establish “uniform

Laws on the subject of Bankruptcies throughout the United States.” U.S. Const. art.

I, § 8, cl. 4. This exclusive grant of authority means that a debtor’s decision to file a

bankruptcy petition may result in the treatment of its property rights in a manner

inconsistent with the treatment it might receive under state law. Title Max v.

Northington (In re Northington), 876 F.3d 1302, 1311 (11th Cir. 2017) (“Congress has

extensive authority in the bankruptcy arena—including the authority to supersede

state property law.” (citing U.S. Const. art. I, § 8, cl. 4)).

The court rejects the Lynes’ argument that their rights under Missouri TBE

law should control despite the Bankruptcy Code’s clear modification of those rights

in bankruptcy. The Lynes cite Butner v. United States, 440 U.S. 48 (1979) for the

following proposition: “Property interests are created and defined by state law.

Unless some federal interest requires a different result, there is no reason why such

interests should be analyzed differently simply because an interested party is

involved in a bankruptcy proceeding.” Id. at 55. Butner, however, acknowledges that

federal interests can change the treatment of a debtor’s property interests. Here,

there are two overriding federal interests that require a different result: (1) limiting

a debtor’s ability to exempt transferred property that the trustee recovers for the

benefit of unsecured creditors, see In re Hicks, 342 B.R. 596, 599 (Bankr. W.D. Mo.

2006) (discussing the purpose of § 522(g)); and (2) ensuring a “uniform” bankruptcy

process and administration of estate assets. See Howard Delivery Serv., Inc. v. Zurich

Am. Ins. Co., 547 U.S. 651, 655 (2006) (“[T]he Bankruptcy Code aims, in the main, to

secure equal distribution among creditors.”). These federal interests “provide

sufficient justification for why a bankruptcy trustee might have more remedies

available to it than another Missouri creditor.” Abdul-Rahim v. LaBarge (In re

Abdul-Rahim), 720 F.3d 710, 714 (8th Cir. 2013) (citing Benn v. Cole (In re Benn), 491

F.3d 811, 816 (8th Cir. 2007)).

Third, the court is unpersuaded by the Lynes’ argument that allowing individual

creditors to access TBE property would create a windfall not permitted under

Missouri common law. Again citing Butner, the Lynes note that a party should not

receive “a windfall merely by reason of the happenstance of bankruptcy.” Butner, 440

U.S. at 55 (quoting Lewis v. Mfrs. Nat’l Bank, 364 U.S. 603, 609 (1961)). The court

acknowledges the seemingly inequitable result of allowing individual creditors to

receive a benefit from TBE property. But allowing the Lynes to shield the Sienna

from individual creditors would also result in inequity. Outside of bankruptcy, the

Lynes’ Sienna would still be subject to Exeter’s perfected security interest. The

trustee’s avoidance of Exeter’s lien and Exeter’s associated financial loss generated a

“windfall” that some party must receive. The Lynes should not “reap [the] windfall

benefit” of avoiding Exeter’s lien “just because the lien which the debtor granted was

not perfected . . . timely,” In re Hicks, 342 B.R. at 601, or “by reason of the

happenstance of bankruptcy.” Butner, 440 U.S. at 55. This unintended benefit to

unsecured creditors is part of the bankruptcy bargain the Lynes entered into when

they sought relief under the Bankruptcy Code. Bankruptcy can provide the Lynes

“extraordinary relief that is unavailable outside of bankruptcy by obtaining a

bankruptcy discharge.” In re Benn, 491 F.3d at 816. But in exchange, their trustee

may exercise “powers that are unavailable to creditors outside of bankruptcy.” Id.

Moreover, the resulting benefits to unsecured creditors are precisely what § 522(g)

contemplates. Congress has explicitly determined which assets are available to

satisfy a debtor’s debts, and under which circumstances a debtor may or may not

claim those assets as exempt. Because Congress restricted a debtor’s ability to claim

their exemptions when § 522(g) applies, the Lynes’ windfall argument fails.

Fourth, and finally, allowing individual creditors to access TBE property is

consistent with this court’s precedent. In Brown v. Eads (In re Eads), 271 B.R. 371

(Bankr. W.D. Mo. 2002), the court discussed the proper division of proceeds from the

sale of TBE property owned by a debtor and his non-filing spouse. The court stated

that the trustee in Eads could use excess, non-exempt TBE property to satisfy the

claims of individual creditors. Id. at 377. Specifically, the court concluded:

If there are funds remaining after the Trustee has paid the joint debts

of [the debtor and his non-filing spouse], the remaining funds should be

returned to [the debtor] as his [TBE] funds, free from the claims of his

individual creditors, if he amends his schedules to exempt the property

pursuant to § 522(b)([3])(B). If he fails to do so, the Trustee may apply

any amounts remaining after payment of the parties’ joint debts to the

payment of [the debtor’s] separate, individual debts.

Id. at 376–77 (emphasis added) (citation omitted). This authority further supports

the logical conclusion that mere TBE ownership, without a validly-claimed

exemption, is insufficient to shield TBE property from individual creditors.6

III. The Court Cannot Confirm the Lynes’ Chapter 13 Plan

Having determined that the Lynes cannot exempt the Sienna or shield its

value from their individual unsecured creditors, the court now analyzes whether it

can confirm the Lynes’ chapter 13 plan.

Section 1325 sets forth the requirements to confirm a chapter 13 plan. Among

them is the requirement that “the value, as of the effective date of the plan, of

property to be distributed under the plan on account of each allowed unsecured claim

is not less than the amount that would be paid on such claim if the estate of the debtor

were liquidated under chapter 7.” 11 U.S.C. § 1325(a)(4). In a chapter 7 case, the

trustee must “collect and reduce to money the property of the estate for which” he

serves in a manner that maximizes the return to the debtor’s unsecured creditors. 11

U.S.C. § 704(a)(1).

Here, if the Lynes had filed for bankruptcy relief under chapter 7, a trustee

could have (1) administered a portion of the value of their TBE residence to pay the

Lynes’ joint creditors in full, (2) avoided and recovered Exeter’s lien in the Sienna for

6 In their brief, the Lynes cited In re Monzon, 214 B.R. 38 (Bankr. S.D. Fla. 1997), to support their

argument that “non-exempt” TBE property may be distributed only to joint creditors. See id. at 48.

This argument, however, mischaracterizes the holding in that case. In Monzon, the debtors claimed

the TBE exemption. Id. at 39. The Florida court used the term “non-exempt” TBE property to refer

to the portion of TBE property that joint creditors can pursue (i.e., the portion of TBE property equal

to the amount of joint debt). Id. at 40–41. Here, when using the term “non-exempt” TBE property,

the court is referring to TBE property that the debtors have not claimed as exempt under the TBE

exemption. Thus, Monzon does not apply.

the benefit of the estate, and (3) administered the Sienna for the benefit of the Lynes’

individual unsecured creditors. As a result, the Lynes’ individual unsecured creditors

would have received at least partial payment of their claims had this case been filed

as a hypothetical chapter 7 case. The Lynes’ first amended plan, however, does not

provide for the distribution of any amount to their individual unsecured creditors.

Thus, the amended plan pays the Lynes’ individual unsecured creditors less than

what they would receive in a hypothetical chapter 7 liquidation and, consequently,

fails the best interest of creditors test under § 1325(a)(4). The court, therefore, cannot

confirm the Lynes’ amended plan.

CONCLUSION

Because the Lynes’ individual unsecured creditors would receive a partial

distribution in a hypothetical chapter 7 liquidation, the Lynes’ amended chapter 13

plan fails the mandatory “best interest of creditors” test under § 1325(a)(4) and may

not be confirmed. Consequently, the court GRANTS the trustee’s motion to deny

confirmation. The Lynes will have thirty (30) days after entry of this order to file an

amended plan.

Dated: 2/4/2026 /s/ Brian T. Fenimore

United States Bankruptcy Judge