In re Marriage of WalkerAnnotate this Case
The parties petitioned for dissolution of marriage in 2006. Cheryl Walker filed for bankruptcy in December 2007. Cheryl's bankruptcy schedule A listed two real properties held in cotenancy, including the family home. The proceeds (beyond the amount needed to pay the secured lender) from the sale of the family home was available for distribution to the parties. The question this case presented for the Court of Appeal's review was whether the should have been distributed equally or was one spouse entitled to a greater share because of the bankruptcy discharge? The trial court awarded Cheryl a larger share of the proceeds than her ex-husband Roy Walker, ruling that to do otherwise would enforce a discharged debt against Cheryl and thereby violate federal bankruptcy law. The Court of Appeal reversed: "Though a secured lender's potential right to a deficiency judgment (i.e., in personam liability) can be discharged in bankruptcy, the lender's lien on real property (i.e., in rem liability) is unaffected by a discharge in bankruptcy. Here, the lien was extinguished at closing by payment of the current amount owed on the loan, a necessary condition to selling the property and thereby benefitting both Cheryl and Roy. Under state law, the parties were entitled to equal shares of the proceeds. This result is consistent with bankruptcy law."