On appeal, the Fourth Circuit Court of Appeals (J. Hanes, Heytens, and Benjamin) affirmed the rulings of the Bankruptcy Court and the District Court for the Middle District of North Carolina sustaining the Chapter 7 Trustee’s objection to the Debtor’s claimed exemptions. The Debtor owed a tax debt to the Internal Revenue Service (“IRS”) and the Fourth Circuit panel considered the lower courts’ ruling that the Debtor’s interest in entireties property was not “exempt from process under applicable bankruptcy law.” 11 U.S.C. § 522(b)(3)(B). The Fourth Circuit utilized the same standard of review as the District Court, i.e. it reviewed the Bankruptcy Court’s legal conclusions de novo and its findings of fact for clear error. 
     Writing for the majority, District Judge Elizabeth Hanes (sitting by designation) affirmed the lower courts’ ruling that, while North Carolina law exempts entireties property from the claims of non-joint creditors, such property is not exempt from federal law and specifically the U.S. Tax Code. She also seconded the lower courts’ finding under United States v. Craft, 535 U.S. 274 (2002) that, “because a federal lien can attach to one spouse’s interest in entireties property, even when the tax debt is not jointly owed, the property is not ‘exempt from process’ under federal nonbankruptcy law if the IRS has the right to obtain such a lien.”
     Judge Hanes specifically refuted the Debtor’s two primary arguments. Citing to the Fourth Circuit’s decision in Sumy v. Schlossberg, 777 F.2d 921, 928 n.1 (4th Cir. 1985), Judge Hanes rejected the Debtor’s argument that the IRS must obtain a perfected tax lien on the Debtor’s real property in order to find the Debtor’s interest was not exempt from process under § 522(b)(3)(B), noting that “the absence of a judgment or lien has no bearing on the hypothetical issue of whether the debtor’s interest would be exempt from process[.]” Judge Hanes was similarly unpersuaded by the Debtor’s second argument, that Craft requires the IRS to perfect a lien against the Debtor’s property before he filed for bankruptcy. Judge Hanes found that “[n]othing in Craft limits its holdings to instances where the IRS has perfected a tax lien against the property,” and “to rule otherwise would create perverse incentives by allowing a debtor to shield his entireties property from federal tax obligations as long as the debtor files for bankruptcy before the IRS issues a demand for the taxes or a Notice of Federal Tax Lien.” For those reasons, Judge Hanes affirmed the lower courts, holding “that property owned as a tenancy by the entirety may not be exempted from an individual debtor’s bankruptcy estate under 11 U.S.C. § 522(b)(3)(B) to the extent of the debtor’s tax debt to the IRS.”