Community property works differently in bankruptcy. I probably don't have to tell you that. On the issue of assets and debts, community property is pretty straightforward. All of the community property comes into the estate upon the commencement of a bankruptcy case, even when only one spouse files. §541(a)(2). Every creditor with a right to be paid from the community can file a claim, regardless of which spouse incurred the debt. §101(7). So creditors of the nonfiling spouse are proper claimants in the filing spouse's bankruptcy case. If the bankruptcy estate contains separate property as well, §726 creates a distribution scheme that segregates community assets from separate property assets in paying community and non community debts. So far pretty straightforward. The community property discharge Then we get to discharge. Because all of the community property comes into the estate, and all of the community claims are treated in the estate, any future community … [Continue reading...]
