In Re Brace

9 Cal. 5th 903 (2020)

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Nature of the Case

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Facts

Brace (H) filed a petition under chapter 7 in Bankruptcy Court. H and Ahn Brace (W) married in 1972. Around 1977 or 1978, the couple acquired a residence. They also acquired a rental property. They acquired both properties with community funds and took title to each property as “‘husband and wife as joint tenants.’” A chapter 7 bankruptcy estate generally includes “all interests of the debtor and the debtor's spouse in community property” at the time the bankruptcy case is filed. The Bankruptcy Code specifies that community property is part of the estate; bankruptcy courts look to state law to determine what property counts as community property. The bankruptcy trustee sought a declaration that both properties are community property under Family Code section 760. W has not joined in her husband's bankruptcy petition. If the properties are community, then the entirety of the Braces' interests in the properties becomes part of the bankruptcy estate. If the properties are separate, then only H's one-half property interest becomes part of the estate. The bankruptcy court held that “‘the properties were acquired during the marriage with community assets and they presumptively constitute community property under applicable law. H and W failed to rebut this presumption. H and W appealed. The court certified a question.