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

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

,

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

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

Community Property