• Home
  • Bankruptcy in Brief
  • ABC’s of Bankruptcy
  • Considering Bankruptcy
  • True Stories
  • Chapter 13
  • Blog
  • About
  • TOC

Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box
  • How bankruptcy works
  • Mortgage Matters
  • Consumer Rights
  • You & Your Lawyer
  • Small Business
  • Family Law

Earthquake In California Law Of Community Property And Title

By Cathy Moran

The ground has shifted under California real property law.

The change looms as large as a quake along the San Andreas fault that runs through our neighborhood.

The  words on a real property deed no longer mean exactly what they say when the property owners are married to each other.

The newly decided Brace case holds that the presumption that property acquired during marriage is community property trumps the form of title expressed in the deed.

Under this decision, spouses who take title to real estate as “husband and wife, as joint tenants”  hold that property as community property, not the separate property that follows from the form of title,  unless they’ve taken another step.

That other step requires a written agreement, expressly transmuting the property from community property to the separate property of each spouse.

trans·mute-change in form, nature, or substance.

Without getting too geeky, Brace addressed the collision between two statutory presumptions in California law.

One presumption says that the form of title expressed in a deed controls the characterization of the property, in the absence of evidence that it’s really something else.  So, if the deed says we’re joint tenants, and California law says that joint tenancy is a form of ownership distinct from community property, then the property is our separate property, even if we’re married.

The competing presumption says that property that a married couple acquires during marriage is community property.  So which presumption wins when married folks acquire property during marriage taking title as joint tenants?

The Brace decision says that the community property presumption wins:  the property is community property.

Why characterization matters

A central tenant of California community law is that all of the community property of a married couple is liable for the debts of either spouse.

If we’re married, my half of the marital community can be seized by your creditor for a debt I have nothing to do with.

In bankruptcy, if one spouse files bankruptcy, all of the community property of the marriage comes into the bankruptcy estate .  The bankruptcy trustee can sell all non exempt property to pay creditors of the community.

Tremors caused by Valli decision

Until Brace, the bankruptcy community turned to the 9th Circuit’s decision called Summers, applying California law to a bankruptcy governed by federal law.  Summers held that the title presumption in the deed by which spouses acquired real property was effective to show their intention to hold the property as the separate property of each spouse.

Then the California Supreme Court decided Valli, determining that when Rudy bought a life insurance policy during marriage and took title in his wife’s name, his decision to give her title wasn’t effective to defeat the community property presumption.  That was so, the court said, even though Rudy was the spouse who gave up his interest in what would otherwise be community property.

When the Valli’s divorced, Rudy claimed the insurance policy was community property, and eventually won.

The question in the bankruptcy context has been whether the presumptions that operated in divorce carried over to debtor/creditor rights in California property where there was no divorce involved.

The Brace decision says it does.

More from the Soapbox

  • Bankruptcy Busts Taxes If The Timing Is RightBankruptcy Busts Taxes If The Timing Is Right
  • Your Right To Credit Reporting After BankruptcyYour Right To Credit Reporting After Bankruptcy
  • Does THIS Violate My Bankruptcy Discharge?Does THIS Violate My Bankruptcy Discharge?
  • 5 Essential Tips To Understand Your Mortgage Loan5 Essential Tips To Understand Your Mortgage Loan
  • Can A Trust Protect You In Bankruptcy?Can A Trust Protect You In Bankruptcy?

Filed Under: Real property & mortgages, Strictly California Tagged With: 2017

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

When Can I File Bankruptcy Again

Remember the old high school cheer:  two, four, six, eight, who do we appreciate? Turns out, that's not just a cheer, it's shorthand for the rule on when you can file bankruptcy again. And it points out that when you can file again depends on what kind of bankruptcy you filed last time. Here's how it … Read more

More Posts from this Category

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700
Phone: (650) 368-4700

Categories

All content copyright © Moran Law Group. All rights reserved.