Kenneth Bryan Benfield

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: 	CASE NO. 26-01931-5-DMW
KENNETH BRYAN BENFIELD
CHAPTER 7
DEBTOR
ORDER OVERRULING OBJECTION TO EXEMPTION
This matter comes before the court upon the Trustee’s Objection to Entireties Exemption
(“Objection”) filed by George F. Sanderson III, Esq. (“Trustee”) in his capacity as Chapter 7 trustee
for the bankruptcy estate of Kenneth Bryan Benfield (“Debtor”) on July 30, 2026 and the Response
filed by the Debtor on August 17, 2026. The court conducted a hearing on September 1, 2026 in
Raleigh, North Carolina. The Trustee appeared on his own behalf, and Philip Sasser, Esq. appeared
for the Debtor. After consideration of the evidence presented and arguments of counsel, the court
makes the following findings of fact and conclusions of law:
____________________________________
David M. Warren
United States Bankruptcy Judge
SO ORDERED.
SIGNED this 16 day of September, 2026.
______________________________________________________________________
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Background
The Debtor filed a voluntary petition for relief under Chapter 7 of the United States
Bankruptcy Code 1 on April 30, 2026, and the court appointed the Trustee to administer the estate
pursuant to § 704. In Schedule A/B: Property, the Debtor disclosed a tenancy by the entirety
ownership of 10.97 acres of real property (“Property”) located at 9172 NC Highway 57,
Rougemont, Orange County, North Carolina with a stated value of $200,000.00. There are no
scheduled liens encumbering the Property. In Schedule C-1 – Property Claimed as Exempt, the
Debtor claimed an exemption in the Property pursuant to § 522(b)(3)(B) and the law of the State
of North Carolina pertaining to property held as tenants by the entirety. In Schedule E/F: Creditors
Who Have Unsecured Claims, the Debtor listed nonpriority unsecured debts for which he is
individually liable totaling $28,714.17.
In or around 2011, the Debtor and Sandra Anne Medlin Benfield (“Mrs. Benfield”) were
married. The Debtor and Mrs. Benfield first acquired the Property pursuant to a General Warranty
Deed (“First Deed”) executed by Blue Ridge Property Buyers, LLC on April 11, 2016 and recorded
with the Orange County Register of Deeds on April 15, 2016. The First Deed identifies the grantee
as “Sandra Anne Medlin Benfield and husband, Kenneth Bryan Benfield.”
On or about March 6, 2017, the Debtor and Mrs. Benfield executed a North Carolina
General Warranty Deed (“Second Deed”) dated February 17, 2017 which transfers the Property to
“JOHN RAINEY WALKER (MARRIED)” (“Mr. Walker”). Mr. Walker is Mrs. Benfield’s son
from a prior marriage. Over six years later, on June 26, 2023, the Second Deed was recorded with
the Orange County Register of Deeds, and the recording indicates that no consideration was paid
by Mr. Walker in exchange for the Property. At the time of recording, the Debtor and Mrs. Benfield
1 Except for within formal citations, references to the Bankruptcy Code, 11 U.S.C. § 101 et seq., will be by
section number only.
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were separated and parties to a civil action initiated by Mrs. Benfield against the Debtor in the
Orange County District Court, Case Number 23CVD000138-670 (“Domestic Action”), seeking
divorce from bed and board and equitable distribution.
The Debtor asserts that he first became aware of the transfer of the Property to Mr. Walker
after the Second Deed was recorded during the pendency of the Domestic Action. The Debtor
explains that he became physically and mentally disabled by a motorcycle accident which occurred
in 2014, and he alleges that Mrs. Benfield and Mr. Walker conspired and took advantage of his
medically induced incapacitation when executing the Second Deed.2 Upon discovering the transfer
of the Property to Mr. Walker, the Debtor engaged an attorney to seek avoidance of the transfer as
a fraudulent conveyance, and Mr. Walker subsequently agreed to reconvey the Property back to
the Debtor and Mrs. Benfield.
On September 29, 2023, Mr. Walker executed a Special Warranty Deed (“Third Deed”),
conveying the Property to the Debtor and Mrs. Benfield. The Third Deed identifies the grantor as
“JOHN RAINEY WALKER (divorced)” and the grantee as “SANDRA ANNE MEDLIN
BENFIELD (separated) and KENNETH BRYAN BENFIELD (separated).” The Third Deed was
recorded with the Orange County Register of Deeds on November 1, 2023.
On December 11, 2025, the Domestic Action was administratively closed. The Debtor and
Mrs. Benfield never divorced and remain married.
Discussion
This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) which the court has
the authority to hear and determine pursuant to 28 U.S.C. § 157(b)(1). The court has subject matter
2 The Property was purchased using settlement funds paid to the Debtor in connection with his injuries
sustained in the motorcycle accident.
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jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334 and the General Order of Reference entered
on August 3, 1984 by the United States District Court for the Eastern District of North Carolina.
One of the fundamental protections provided to an individual debtor to ensure a “fresh
start” is his right to exempt certain interests in property from the bankruptcy estate created by
§ 541. See Schwab v. Reilly, 560 U.S. 770, 791 (2010). The Bankruptcy Code allows a debtor to
elect exemptions under either federal law as set forth in § 522(d) or applicable state law, unless the
applicable state law “does not so authorize.” In re Rogers, No. 16-02884-5-JNC, 2016 WL
5794707, at *2 (Bankr. E.D.N.C. Oct. 3, 2016) (quoting 11 U.S.C. § 522(b)).
North Carolina law provides that “[t]he exemptions provided in The Bankruptcy Code, 11
U.S.C. § 522(d), are not applicable to residents of this State. The exemptions provided by this
Article and by other statutory or common law of this State shall apply for purposes of The
Bankruptcy Code, 11 U.S.C. § 522(b).” N.C. Gen. Stat. § 1C-1601(f) (2025). Notwithstanding this
“opt-out” provision, a North Carolina debtor may claim a tenancy by the entirety exemption under
§ 522(b)(3)(B). Chief Judge Laura T. Beyer of the United States Bankruptcy Court for the Western
District of North Carolina recently explained as follows:
North Carolina recognizes tenancy by the entirety, a form of co-ownership
of real property held by husband and wife with the right of survivorship. See North
Carolina General Statute § 41-[56]. However, there is no separate tenancy by the
entirety exemption listed in the state's exemption statute, North Carolina General
Statute section 1C-1601. The only reference to the concept appears in section 1C-
1601(a)(1) where it is listed as one of the elements of an enhanced homestead
exemption for elderly debtors whose former co-owner is deceased.
The Bankruptcy Code, however, includes a tenancy by the entirety
exemption. Debtors may use the exemption set forth in 11 U.S.C. § 522(b)(3)(B) to
exempt “any interest in property in which the debtor had, immediately before the
commencement of the case, an interest as a tenant by the entirety or joint tenant to
the extent that such interest as a tenant by entirety or joint tenant is exempt from
process under applicable nonbankruptcy law.” This exemption is available even if
the Code requires a debtor to use state exemptions. See Schlossberg v. Barney, 380
F.3d 174, 178 (4th Cir. 2004).
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In re Hmok, 663 B.R. 674, 679 (Bankr. W.D.N.C. 2024).
The Trustee is objecting to the Debtor’s claimed tenancy by the entirety exemption in the
Property, asserting that the Third Deed does not convey the Property to the Debtor and Mrs.
Benfield as tenants by the entirety. Absent this exemption, the unencumbered Property is subject
to liquidation by the Trustee for the benefit of the Debtor’s unsecured creditors.
“Property interests are created and defined by state law.” Butner v. United States, 440 U.S.
48, 55 (1979). The North Carolina General Statutes provide that—
[u]nless a contrary intention is expressed in the conveyance, a conveyance of real
property, or any interest in real property, to spouses vests title in them as tenants by
the entirety when the conveyance is to one of the following:
(1) A named man “and wife.”
(2) A named woman “and husband.”
(3) A named individual “and wife.”
(4) A named individual “and husband.”
(5) A named individual “and spouse.”
(6) Two named individuals, married to each other at the time of the
conveyance, whether or not identified in the conveyance as being (i)
husband and wife, (ii) spouses, or (iii) married to each other.
N.C. Gen. Stat. § 41-56(a) (2021) (emphasis added). The Debtor and Mrs. Benfield presumptively
hold the Property as tenants by the entirety, because the Third Deed identifies them within the
confines of N.C. Gen. Stat. § 41-56(a)(6); however, the Trustee contends that the designation of
“(separated)” next to each of their names expresses a contrary intention. The court disagrees.
North Carolina real estate deeds often designate the marital status of a grantor or grantee
to provide record notice of that status. A common example is disclosing that an individual taking
title to real property in their sole name is married, because in North Carolina, a spouse holds a
marital interest in the other spouse’s real property which prevents a married individual from
conveying clean title to real property unless their spouse jointly executes the deed. See N.C. Gen.
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Stat. § 39-7 (1965). An individual owner’s married status on a deed will alert future potential
purchasers that a second signature may be necessary on a conveyance deed.3
“Real property held by husband and wife as tenancy by the entirety is not subject to a claim
by a creditor against only one spouse without the assent of the other. Under North Carolina law,
property held as tenancy by the entireties can only be reached by joint creditors to satisfy joint
debts.” In re Clifton, No. 09-02379-8-RDD, 2013 WL 3805647, at *5 (Bankr. E.D.N.C. July 19,
2013) (citing Davis v. Bass, 188 N.C. 200, 205, 124 S.E. 566, 568-69 (1924)). This powerful
protection from individual creditors is not provided to property owned by tenants in common, and
“[a]n absolute divorce coverts property held as tenants by the entirety to a tenancy in common.”
N.C. Gen. Stat. § 41-63(5) (2025). The court views the Third Deed’s disclosure that the Debtor
and Mrs. Benfield were at that time separated as a way of providing notice to individual creditors
that the tenancy by the entirety ownership might soon be severed and further investigation is
warranted. If the Debtor and Mrs. Benfield intended to take ownership of the property other than
as tenants by the entirety, then the Third Deed, which was prepared by an attorney, should have
designated them specifically as either tenants in common or joint tenants with the right of
survivorship.
Extrinsic or parole evidence is generally inadmissible to determine the effect of a deed. See
Bost v. Brown, 293 N.C. App. 363-71, 370, 901 S.E.2d 349, 354 (2024) (citation omitted) (finding
the affidavit of the attorney who prepared a deed inadmissible to aid in the interpretation of the
deed’s legal effect). However, the history of transfers of the Property supports the court’s
conclusion based upon the face of the Third Deed that the Debtor and Mrs. Benfield own the
3 The Second Deed identifies Mr. Walker as married, but the Third Deed identifies him as divorced. At the
hearing, the court pondered whether Mr. Walker’s ex-spouse, who did not execute the Third Deed, may have an interest
in the Property which could further complicate this already convoluted series of transactions.
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Property as tenants by the entirety. They indisputably took title to the Property under the First Deed
as tenants by the entirety, and Mr. Walker seemingly executed the Third Deed to restore the status
quo after receiving what was likely an avoidable fraudulent transfer of the Property by the Second
Deed; now therefore,
It is ORDERED, ADJUDGED, and DECREED that the Objection be, and hereby is,
overruled.
END OF DOCUMENT
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