The Intersection of Bankruptcy and Family Law in Property Identification

Explore the complexities of estate property identification in bankruptcy proceedings and family law, including what is considered as part of the estate, what is excluded, and the determination of property interests under state law. Learn about community property, sole-managed community property, and the implications on the debtor and spouse's interests.

• Bankruptcy
• Family Law
• Estate Property
• Community Property
• Property Identification

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1. The Intersection Of Bankruptcy And Family Law Randy Wilhite Fullenweider Wilhite, P.C. rwilhite@fullenweider.com Johnie Patterson Walker & Patterson, P.C. jjp@walkerandpatterson.com

2. Identifying Estate Property Property of the Estate Includes: The Debtor s Separate Property; Sole Managed Community Property Of The Debtor; Joint Managed Community Property. 11 U.S.C. 541(a)(2)

3. Identifying Estate Property Does Not Include: Separate Property Of The Non-Filing Spouse; Sole Managed Community Property Of The Non-Filing Spouse

4. Identifying Estate Property Debtor s Determined Under State Law Butner v. U.S., 440 U.S. 48 (1979) Interest In Property Is

5. Identifying Estate Property Community property consists of the property, other than separate property, acquired by either marriage. TEX. FAM. CODE 3.002 spouse during The presumption is rebuttable by clear and convincing evidence.

6. Identifying Estate Property During the marriage, property is presumed to be subject to the sole management, control, and disposition of a spouse if it is held in that spouse s name, as contract, deposit of funds, or other evidence of ownership, or if it is in that spouse s possession and is not subject ownership. TEX. FAM. CODE 3.104(a) (emphasis added) shown by muniment, to such evidence of

7. Identifying Estate Property Sole Managed Community Property: Basically, if the property has a title a deed to real property, a certificate of title on a car or boat, a bank account, etc. and the asset in question is titled in the name of only one spouse, it is under the sole management of that spouse, even though it is community property. See, e.g., In re McCloy, 296 F.3d 370 (5th Cir.2002)

8. Identifying Estate Property One More All interests of the Debtor and the Debtor s Spouse in community property as of the commencement of the case that is: Liable for an allowable claim against the Debtor, or for both an allowable claim against the Debtor and an allowable claim against the Debtor s spouse, to the extent that such interest is so liable. 11 U.S.C. 541(a)(2)(B)

9. Identifying Estate Property And After Acquired Property. 11 U.S.C. 541(a)(5) Any interest in property that would have been property of the estate that the debtor acquires within 180 days As a result of a property settlement agreement with the debtor s spouse or of an interlocutory or final divorce decree. Also see section 1306(a)(1) Majority of cases interpret 1306(a)(1) to include property acquired beyond 180 days. See, e.g., Carroll v. Logan (In re Carroll), 735 F.3d 147, 150-152 (4th Cir. 2013) (Inheritance acquired by chapter 13 debtor beyond the 180 day period in 541(a)(5) is property of the chapter 13 estate)

10. Spousal Liability Joint Liability Debt - All property of either spouse. Husband s separate property is subject to husband s separate debts. Wife s separate property is subject to wife s separate debts. Husband s separate property, sole managed community property, community property, liable for husband s pre- marital liabilities and husband s nontortious (contractual) liabilities during marriage. and joint managed

11. Spousal Liability Wife s separate property, sole managed community property, and joint managed community property is liable for wife s premarital liabilities tortious (contractual) marriage. Tort liability incurred during marriage, all property other than the separate property of the non-offending spouse is liable. and liabilities wife s non- during

12. Spousal Liability Section 3.201, entitled "Spousal Liability," provides: (a) A person is personally liable for the acts of the person's spouse only if: (1) the spouse acts as an agent for the person; or (2) the spouse incurs a debt for necessaries as provided by Subchapter F, Chapter 2. (b) Except as provided by this subchapter, community property is not subject to a liability that arises from an act of a spouse. (c) A spouse does not act as an agent for the other spouse solely because of the marriage relationship. TEX. FAM. CODE 3.201 In re Trammell, 399 B.R. 177 (Bankr. N.D. Tex 2007)

13. Spousal Liability Agency Necessaries Cockerham v. Cockerham, 527 S.W.2d 162 (Tex.1975)

14. IdentifyingCreditors Claims/Creditors Creditor Has a claim as of the entry of an order for relief; Claim pursuant to 348(d), 502(f), 502(g), 502(h), 502(i); Has a community claim. 11 U.S.C. 101(10)

15. Identifying Creditors Community Claim Prepetition claim for which property described in 541(a)(2) is liable, whether or not actually exists such property 11 U.S.C. 101(7)

16. Identifying Creditors Community Claim Does not modify definition of property of the estate. Buescher v. First United Bank and Trust (In re Buescher), 783 F.3d 302 (5thCir. 2015) Allows state law creditors of the nondebtor spouse access to community property for the satisfaction of their community claims and allows them to participate in the distribution of estate assets. In re Miller, 167 B.R. 202 (Bankr. C.D. Cal.1994)

17. Split (Community) Discharge Community Discharge 11 U.S.C. 524(a)(3) A discharge operates as an injunction against the commencement or continuation of an action collect or recover from property of the debtor as defined in section 541(a)(2) that is acquired after the commencement of a case, on account of an allowable community claim, except a community claim that is excepted from discharge, or that would be so excepted, in a case concerning the debtor s spouse commenced on the date of the filing of the debtor s case, whether or not discharge of the debt based on the community claim is waived. to

18. Split (Community) Discharge "Subsection (a) also codifies the split discharge for debtors in community property states. If community property was in the estate and community claims were discharge is effective creditors of the non-debtor spouse as well as of the debtor spouse. House Report No. 95-595, 95th Congress, 1st Session (1977) 365-6 and Senate Report No. 95-989, 95th Congress, 2nd Session (1978) 80, U.S.Code Cong. & Admin.News 1978, pp. 5787, 5866, 6321. discharged, against the community

19. Split (Community) Discharge Community Claim Holders have a duty to object to the hypothetical discharge. In re Karber, 25 B.R. 9, 12 (Bankr. N.D. Tex. 1982) non-filing spouse s

20. Split (Community) Discharge Exception 11 U.S.C. 524(b) The Debtor s spouse was a debtor in a case commenced within 6 years of the petition in Debtor s case, and was denied a discharge, or The Debtor s spouse would be denied a discharge under a chapter 7 if the spouse filed a case on the petition date of the Debtor. Deadlines apply.