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Bankruptcy | Case Law | Community Property
COMMUNITY PROPERTY §541(a)(2)(A),(B)
In re Heilman, 430 B.R. 213 (9th Cir. BAP 2010)
Where only one spouse files a chapter 7 bankruptcy, a community debt is discharged only
as to the filing spouse. A subsequent dissolution decree that obligated the debtor to hold the
nondebtor harmless as to the debt that was discharged did not create a new postpetition
obligation, because it did not comply with the requirements for a reaffirmation agreement.
In re Summers, 332 F.3d 1240 (9th Cir. 2003)
“. . . [W]e conclude that a third part conveyed joint tenancy interests to Eugene and Marie
Summers, a transaction to which the transmutation statute does not apply. . .The third-party deed specifying the joint tenancy character of the property rebutted the community property presumption, and rendered California’s transmutation statute inapplicable” In re Maynard, 264 B.R. 209 (9th Cir. B.A.P. 2001) Nondebtor husband's interest in property did not prevent the bankruptcy court from avoiding secured creditor's lien on real property to the extent it exceeded the value of the property under § 506(d). In re McIntyre, 222 F.3d 655 (9th Cir. 2000) The IRS may levy upon ERISA-regulated pension benefits to satisfy a husband's tax debt against the claim that the wife has a vested interest in half of those benefits under California community property laws. In re Been, 153 F.3d 1034 (9th Cir. 1998) Under CA law, non-judicial foreclosure sale by senior lienholder terminates “sold-out” junior lienholder’s secured interest in debtor’s property and any remaining rights which might“arise out of” foreclosure proceeding.
Effect of Tax Returns - key: 205k266.2(3) 1) pre-’85 transaction Nevins v. Nevins, 129 Cal.App.2d 150 (1954) Separate federal income return was filed that did not include half of spouse’s income even though he was aware of existence of wife’s income is highly probative of transmutation of cp interest in his spouse’s income to his spouse’s separate property. In re Marriage of Weaver, 224 Cal.App.3d 478 (Cal App. 1990) Clear and convincing evidence required to prove oral transmutation. Statements of testamentary intent are not sufficient. 2) post-’85 transaction - Civ. Code §5110.730(a) - express writing requirement. In re Marriage of Lehman, 18 Cal.4th 169 (1998) Ex-wife entitled to community property share of increased benefits her former husband 82 gets by taking early retirement Estate of MacDonald, 51 Cal. 3d 262, 272 (1990) Writing must contain language which expressly states that the characterization or ownership of the property is being changed In re Roosevelt, 87 F.3d 311 (9th Cir. 1996), cert. denied, 520 U.S. 1209 (1997) Under CA law, a married person may transmute an asset, in which he has a cp interest, to separate property of his spouse if it is made in writing (marital agreement) by an express declaration by the spouse whose interest in the property is adversely affected. In re Mantle, 196 B.R. 513 (9th Cir. B.A.P. 1996) rev’d, 153 F.3d 1082 (9th Cir. 1998), cert. denied, 526 U.S. 1068 (1999) B.A.P. held that spouse’s interest in escrow derived form sale of marital property is not included in estate of other spouse’s bankruptcy filed before final dissolution. 9th Circuit reversed, holding that division of community property is what triggers reimbursement right under Fam. Code §2640. In re Keller, 185 B.R. 796 (9th Cir. B.A.P. 1995) In a non-dissolving marriage, cp is property of the estate (In re Teel, 34 B.R. 762, 764 (9th Cir. B.A.P. 1983) and §541(a)(2)(A),(B). When a bankruptcy petition is filed prior to the final disposition of a property between divorcing spouses, the cp comes within the jurisdiction of the bankruptcy court to assure fairness to the creditors of the individual spouses and the marital estate. Where the bankruptcy court has exclusive jurisdiction over its distribution, division of property by the state court is precluded: The jurisdiction of the bankruptcy court is exclusive because the initiation of divorce or dissolution proceedings does not terminate either spouse’s management and control over cp by placing the cp in legis of the divorce court. (Teel 34 B.R. at 764, quoting 4 Collier on Bankruptcy 541.15 (15th ed 1983) Once dissolution has been accomplished, however, the final judgment is res judicata as to the division of property and is binding on the bankruptcy trustee. Paderewski, 564 F.2d at 1356. Property interests are created and defined by state law. Butner v. US, 440 U.S. 48, 55 (1979). The bankruptcy court therefore must look to state law to determine the nature of the estate’s property rights. In the instant case, those rights were defined and circumscribed by the judgment of the Family Law Court. In re Burg, 103 B.R. 222 (9th Cir. B.A.P. 1989) Property purchased from commingled separate and community property is presumptively community property In re Spirtos, 56 F.3d 1007 (9th Cir. 1995) Party to marital settlement agreement must comply with her obligations to creditors under agreement even though other party to agreement may have failed to perform In re Gorman, 159 B.R. 543 (9th Cir. B.A.P. 1993) Property once held as community property which is converted to joint tenancy is held as joint tenancy 83 In re Chenich, 87 B.R. 101 (9th Cir. 1988) Community property passing to a spouse in a dissolution is shielded from liability on a judgment against other spouse entered after dissolution 84