All posts tagged Cathy Moran

Brace & Beyond: Joint Tenancy & Transmutation, by Cathy Moran

Brace & Beyond: Joint Tenancy & Transmutation, by Cathy Moran

For Californians, the CA Supreme Court’s decision in Brace this summer upended our understanding of joint tenancy and community property.

For decades, we “knew” that a property couldn’t be both joint tenancy and community property. Siberell.  And for those of us in the 9th Circuit, we “knew” that when married folks acquired property with title taken as joint tenants, the property was characterized as the separate property of each spouse when either spouse filed bankruptcy. Summers.

Then, Brace tells us that a married couple taking title to real property as joint tenants is not sufficient, without something more, to transmute the property into the separate property of each spouse despite the clear expression of joint tenancy in the deed. Take a closer look at Brace from my colleague Wayne Silver.

So, where does that leave the hundreds of thousands of married couples who, to the extent they thought about it at close of escrow, believed they each held a separate property joint tenancy interest in the property.

The consequences of community property

While it’s easy to think about community property as an issue only in the dissolution of a marriage, the characterization of property drives issues of tax, probate, and, the focus here, debtor-creditor rights in and out of bankruptcy.

Two statutes, one federal and one state, lie at the heart of the issue . California Family Code 910 makes community property liable for debts incurred by either spouse before or during marriage. Separate property, such as we thought joint tenancies were, is liable only for the debts of the spouse who holds the property (and perhaps, for debts related to the necessities of life provided to the other spouse.)

The federal statute involved, Bankruptcy Code 541, brings all of the community property into the bankruptcy estate even when only one spouse files bankruptcy.  Property of the estate gets administered for the benefit of creditors with claims on the community, even when only one spouse files bankruptcy.

So, treating joint tenancy property held by spouses as community property doubles the fraction of the property exposed to one spouse’s debts, and exposes all of a joint tenancy property to inclusion in a bankruptcy estate.

Why the form of title fails as a transmutation

Up until Brace, cases held that the act of taking title to real property during marriage as joint tenants was sufficient to overcome the presumption of Family Code 910. Even when the down payment and the debt service all came from community funds, the form of title as joint tenants effectively transmuted those funds into the separate property of the spouses, shared equally. Read more…

Cathy Moran Oral History (and Happy Birthday Cathy)

It will always be one of the highlights of my business life that when I asked Cathy Moran if she would let me do her oral history, she said yes.  We met for two hours, two days in a row, at her office near San Jose, discussing her life and of course her views of the bankruptcy world and consumer bankruptcy practices.  She has a lot to say and every consumer bankruptcy attorney should listen to her.  We talked about her early days growing up on a farm in central California, helping her farm animal veterinarian father in his business, even helping him with surgeries here and there.  She went to Stanford undergrad and later Hastings Law school.  But it’s her comments on the practice of bankruptcy, 40 years worth, especially chapter 13, that people should listen to.  The audio of the oral history can be accessed here from the website of the Biddle Law Library of the University of Pennsylvania Law School.  Scroll down to find hers.  Listen to it on one of your walks.  The Biddle Law Library has had it transcribed but has not uploaded that yet.   Let me know what you think.

Her blogs, if you haven’t checked them out, are here and here.

By the way, Happy Birthday Cathy.  Keep yourself well.