When Are You Responsible For Your Spouse’s Debts?
Marriage should be a joyous time of love and unity. The “what’s mine is yours” mentality can apply to almost everything in a marriage, including debt. With consumer debt reaching $14 trillion, it is no wonder that many people are concerned how their financial liabilities will affect their spouse (and vice versa). The experienced family law attorneys and bankruptcy litigators at Talkov Law explain how spousal debt can affect both parties of a marriage, even the party that did not initially incur the debt.
Do you live in a community property state?
The first step in determining whether you will be liable for the debts of your spouse is to understand the laws of the state you live in. There are two types of states: 1) community property states, and 2) non-community property states.
In community property states like California, most debts incurred by a spouse during the marriage are owed by both spouses. In contrast, in non-community property states, debts incurred by one spouse are usually only the incurring spouse’s debts.
If community property rules apply, creditors have three pools of assets to collect from: 1) your separate property, 2) the community property, and 3) the other spouse’s separate property. Accordingly, what you’re really wondering is whether your separate property or the community property can be held liable for the debt.
What does community property mean?
In California, a married person’s property is characterized as either community property or separate property.
California is a community property state. According to Section 760 of the California Family Code, all property acquired, and income earned by either spouse during marriage is community property. Any assets purchased using community funds are also considered community property regardless of whether only one spouse’s name is on the title to the asset. Community property is owned equally by both spouses such that the family court will issue an order on the community property division.
Separate property includes: 1) property acquired before marriage, or property acquired during marriage using separate property funds; and 2) property acquired during marriage through gift, inheritance, or devise (by will). Cal. Fam. Code § 770(a)(3). Separate property remains a spouse’s separate property even after marriage. Issues, profits, and rents earned from separate property also remain a spouse’s separate property.
Even further, the earnings and accumulations of a spouse after the date of separation of the spouses, are the separate property of the spouse. Cal. Fam. Code § 771(a)
Debt Acquired During Marriage—Community Debt
A debt is considered community debt, meaning each spouse is liable for the debt, if:
- the debt benefits the marriage—the debt was incurred for shelter, food, clothes, necessities etc.
- the debt was undertaken by both spouses:
- both spouses signed a contract for the debt
- both spouses’ names are on the title to a property that took on debt
- both spouses’ credit information was considered in making a loan
Debt Acquired Before and During Marriage—Separate Debt
Debt acquired before marriage is considered to be the incurring spouse’s separate debt (i.e. child support debt). Debt acquired during marriage that is for property solely in one spouse’s name remain that spouse’s separate debt.
Debt Acquired After Legal Separation or Divorce—Separate Debt
Debt acquired after legal separation or divorce is generally owed solely by the spouse that incurred the debt, unless incurred for family necessities or to maintain jointly owned assets.
When Can My Separate Property Be Used To Satisfy A Debt?
Your Own Debts
A spouse’s separate property may be used to satisfy debt incurred by that spouse before or during marriage. Cal. Fam. Code §910.
Your Spouse’s Debts and Community Debt
Separate property cannot be held liable for repaying another spouse’s separate debts (non-community debt), whether incurred before or during marriage, unless the debts were incurred for necessities of life (i.e. food, shelter). Cal. Fam. Code §914(a)(1), (b).
What Debts Can a Creditor Hold the Community Property Liable?
Community property is liable for debts incurred by either spouse during the marriage and debt incurred by either spouse prior to marriage. Cal. Fam. Code §910(a) provides that:
Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.
However, the wages of one spouse cannot be reached to satisfy a debt incurred by the other spouse before marriage so long as the wages are held in a deposit account where the debtor spouse has no right of withdrawal. The non-debtor spouse must also ensure that their wages remain separate (uncommingled) from community property. Cal. Fam. Code §911(a).
How Can I Ensure I Will Not be Liable for My Spouse’s Separate Debts?
In community property states such as California, couples can sign a prenuptial (before marriage) or postnuptial (after marriage) agreement to both recharacterize property and have their debts treated as separate debts. Cal. Fam. Code §1500.
If you sign a postnuptial agreement, such agreement will only protect you from liability of future debts and you will remain liable for debts already owed/incurred.
Am I Responsible for My Spouse’s Debt After Marriage (Divorce)?
If you and your spouse divorce in California, the debts you brought into the marriage are yours alone. Debts incurred after marriage can be divided equally between you and your former spouse.
Contact an Experienced Family Law and Bankruptcy Attorney
Navigating intricacies of debt before, during, and after marriage is a complicated subject and there are exceptions to every rule. We highly recommend you consult an experienced California family law attorney or bankruptcy lawyer. For a free consultation with the attorneys at Talkov Law, contact (844) 4-TALKOV (825568) or info(at)talkovlaw.com.