House in Joint Tenancy not Community Property

16 Apr House in Joint Tenancy not Community Property

home sweet home embroidery-ccCalifornia couples have traditionally had two choices in how to take title to a home: community property or joint tenancy.

Community property is the default unless the deed listing a husband and wife says otherwise. Joint tenancy provides that upon death the decedent’s half of the property passes automatically to the survivor.

Why is this relevant to bankruptcy? Because bankruptcy looks to state law to define what it is that the debtor owns. Bankruptcy law will determine what happens to that property.

What comes into the bankruptcy

A bankruptcy filing by one spouse alone brings all of the community property into the estate. The same filing would bring only one half of the value of a house held in joint tenancy.

The 9th Circuit Court of Appeals held in Hanf v. Summers that even if the property is acquired during marriage by California residents using community property to fund the purchase, a title in joint tenancy is the separate property of each spouse.

In the Summers case, it meant that only half of the value of the house came into the bankruptcy estate when one spouse filed bankruptcy.

California homestead

An earlier decision of the Bankruptcy Appellate Panel in my case of McFall ( 112 B.R. 336) held that one spouse was entitled to use the entirety of the California homestead to protect the home in bankruptcy.

The result was that the debtor gets to use the whole homestead exemption against one half of the value of the house. The non filing spouse’s half of the house wasn’t property of the bankruptcy estate, and therefore didn’t need to be exempted.

So, when you discuss bankruptcy with a bankruptcy attorney, know exactly how you hold title to a California home so the attorney can explore all of your options based on the facts.

Image courtesy of jenni waterloo and Flickr.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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