PROGRAM SUMMARY 3-21-2026

CDCBAA Holds Third Meeting and MCLE Program of 2026:
"TIL DEBT DO US PART: HOW DIVORCE, SUPPORT, AND COMMUNITY PROPERTY COMPLICATE CONSUMER BANKRUPTCY CASES”

On March 21, 2026, the CDCBAA held its third members meeting and MCLE program of the year. The meeting and program were conducted as a live webinar via Zoom video.  The program topic was TIL DEBT DO US PART: HOW DIVORCE, SUPPORT, AND COMMUNITY PROPERTY COMPLICATE CONSUMER BANKRUPTCY CASES. Our distinguished speakers were Hon. Victoria Kaufman | Bankruptcy Judge, Central District of California, San Fernando Valley Division; D. Edward Hays, Esq . | Marshack Hays LLP; and Richard G. Heston, Esq. | Heston & Heston.  Board President M. Jonathan Hayes moderated. What follows are some highlights.

At the outset, President Hayes mentioned that, in certain instances, an individual California resident filing for bankruptcy may be eligible for the state’s Address Confidentiality Program, also known as the “Safe at Home” program. This program is designed to offer those in fear for their safety a way to keep their address confidential, out of public records, and out of the hands of anyone who has harmed or wants to harm them. Participants are provided a substitute mailing address, but mailings to that address will be forwarded to the participant's actual mailing address at no cost. Safe at Home also serves as agent for services of process. Individuals who are eligible for the Safe at Home program include: victims of domestic violence, stalking, sexual assault, child abduction, elder or dependent adult abuse, or human trafficking.  But it was also noted that Local Bankruptcy Rule 1002-1 requires a debtor to provide his or her actual street address. Thus, it is still necessary for the debtor or the debtor’s counsel) to advise the bankruptcy trustee and the court of that address in some discrete manner as soon as possible after the filing.

Judge Kaufman then spoke first on the webinar’s topic by noting the bankruptcy code’s deference to marital issues, which is immediately apparent from the fact that matters such as paternity, domestic support, child custody/visitation, domestic violence and marital dissolution (except as to the division of property that is property of the bankruptcy estate) are all expressly excepted from the scope of the automatic stay. Judge Kaufman noted that divorce and alimony are also exclusively matters of state law.

However, with very limited exceptions, the bankruptcy estate also includes all interests of the debtor and of the debtor's spouse in community property on the petition date even if the debtor's spouse has not joined in the bankruptcy petition. See 11 U.S.C. § 541(a)(2). Thus, the frequent interplay between bankruptcy and family law.

In general, community property is all property, real or personal, wherever situated, acquired by a married person during marriage while domiciled in California. See California Family Code § 760. When trusts are involved, unless the trust instrument expressly provides otherwise, community property that is transferred to a revocable trust remains community property during the marriage, regardless of the identity of the trustee; however, the power to revoke as to community property may be exercised by either spouse acting alone. See F.C. § 761. Except as otherwise provided, the respective interests of husband and wife in community property during continuance of the marriage relation are present, existing and equal interests. See F.C. § 751.

Separate property of a married person includes all property owned before marriage, all property acquired after marriage by gift, bequest, devise or descent, and the rents, issues and profits of such property. See F.C. § 770. Earnings and accumulations while the spouses are living separate from each other are the separate property of each spouse, as are the earnings and accumulations acquired after entry of a judgment of legal separation. See F.C. §§ 771 and 772.

Ed Hays discussed the troublesome case In re Heilman, 430 B.R. 213 (9th Cir. BAP 2010). There, the bankruptcy court refused to declare that dissolution decree obligated the former husband to hold the wife harmless on prepetition community debt that had been discharged in the former husband's bankruptcy. The court noted that debt was discharged prior to their divorce agreement and that the assignment to the husband was an attempt to circumvent reaffirmation requirements and that the hold harmless was an attempt to revive a discharged debt. One judge dissented, stating that the hold-harmless obligation imposed on the husband was a post-bankruptcy debt that was not discharged in his Chapter 7 proceeding, and even if it were a pre-bankruptcy debt, it was excepted from discharge.

Mr. Heston discussed In re Sternberg, 85 F.3d 1400 (9th Cir. 1996). In determining whether payments owed by a debtor to a former spouse are spousal support, and therefore nondischargeable, Sternberg instructs the court looks to the parties' intent at the time the agreement was made and focus on: (1) actual need, (2) income imbalance between the parties at the time of the divorce decree, (3) when the obligations terminate, (4) to whom and when payments are made, and (5) the labels given to the payments by the parties (i.e., in the agreement, on tax returns, etc.).  Mr. Heston noted that this case underscores the danger in having a nonmodifiable support order because circumstances can and do frequently change over time. Compounding this concern is the fact that the overwhelming majority of parties to family law proceedings are not represented by counsel.  

Mr. Heston also discussed the bankruptcy means test as it applies to counting household members. Joint child custody agreements/orders can create confusion in this regard.

The panel then discussed an interesting dilemma for non-filing spouses which can arise when that spouse, in reliance upon the nondischargeability language for a debt "incurred in course" of divorce or separation found in section 523(a)(15), allows a deadline to lapse for filing a section 523(a)(4) or (a)(6) claim against the other spouse/now debtor in a Chapter 7, and subsequently faces a possible superdischarge result when the former spouse-debtor later files a Chapter 13 case.  How can this happen? Because California F.C. § 721 (which makes spouses fiduciaries to each other), California F.C. § 1100 et seq. and the provisions of the California Corporations Code provide a possible basis for a non-dischargeability complaint by a non-filing spouse post-separation with respect to a claim for reimbursement (not yet a debt pursuant to a court order), under either § 523(a)(4) breach of fiduciary duty, or § 523(a)(6) willful misconduct. California F.C. § 721 provides, in part, as follows:

"... (b) ... a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, ... This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including ..." (Emphasis added.)

The panel also responded to many questions posed by attendees through the chat feature. A lengthy handout containing further detailed discussion of issues and case citations was also provided to all attendees.

The next CDCBAA members meeting and Zoom MCLE program will be held on May 2, 2026, and the topic will be MEET THE CHAPTER 13 TRUSTEES. Our speakers will be Renee Blume | Staff Attorney for Chapter 13 Trustee, Elizabeth Rojas; Nancy Clark | Borowitz & Clark, LLP; Aki Koyama | Senior Staff Attorney for Chapter 13 Trustee, Kathy Dockery; Sean O'Hair | Staff Attorney for Chapter 13 Trustee, Nancy Curry; and Brian Wirsching | Staff Attorney for Chapter 13 Trustee, Amrane Cohen. 2.0 hours of CLE credit will be provided. We hope you will join us.