In re Brace

Facts: A married couple acquires ownership of a parcel of property vested as joint tenants after 1975. Later, one spouse alone files a petition in bankruptcy as a debtor.

Claim: The trustee in the bankruptcy action claims the property is community property which requires the entire ownership to be included in the debtor spouse’s bankruptcy estate as a source for payment of debts since the property was acquired on or after January 1, 1975.

Counterclaim: The debtor spouse claims only their one-half interest in the property is to be included in their bankruptcy estate since the other one-half interest was put into a trust.

Holding: The federal ninth circuit district court of appeals holds the entire ownership of the property is properly included in the bankruptcy estate of the petitioning debtor spouse due to its status as community property since the property was acquired by the married couple as joint tenants on or after January 1, 1975. [In re Brace (November 9th, 2020)_F. Supp 2nd_]

Editor’s Note — The California Supreme Court on certification from the 9th Circuit Federal Court of Appeals in this case issued its opinion that property acquired by a married couple as joint tenants on or after January 1, 1975, is community property under state law which controls the nature of property ownership. [In re Brace (July 23, 2020) __ C5th ___]

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