Legal Question in Family Law in California

First off, the handling of title on the two properties are separate issues. Neither affects the legal status of the other. The home is B's separate property. Person A is not entitled to a portion of Person B's home. A is, however, entitled to what is called "Moore/Marsden" credit if income or assets of the community were used to pay the mortgage on the home or to pay for permenant improvements, like a remodel or addition that increased the value of the property. The amount of community funds that increased equity in the property, so the principal payment on the mortgage but not the interest for example, is owed back to the community upon dissolution, and half of that belongs to A.

What happens to person B if A goes bankrupt before their dissolution is complete is a specialized bankruptcy law question. Generally "married" couples file for bankruptcy together or dissolve the legal union before filing for bankruptcy. That's not to say A cannot do it mid-dissolution. It's just a specialized situation. If A lets the rental property go into foreclosure there will probably be significant problems for her. She cannot pocket the rents and let the property go without breaching her fiduciary duty to B. She would owe B half the rents she kept, plus be liable for any lost equity.

It sounds like this is a pretty complicated dissolution situation that your friend should have legal guidance, if not outright representation, in dealing with. Although my primary office is in Walnut Creek, I practice throughout Northern California and have facilities in San Mateo and Burlingame. If your friend would like a free half-hour consultation, have her give me a call.