Community property and creditors in California
By Cathy Moran, California Bankruptcy Lawyer on Mar 24, 2007 in General Bankruptcy Information, Marriage and Debt
California is one of seven US states whose marital property system is community property. (The others are Alaska, Arizona, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin). Just what that means in the debtor/creditor context is poorly understood.
First, it means that property acquired during marriage is presumed to be community property. The spouses can agree that their marital assets will be held in some other form, either jointly, or even as the separate property of one spouse. But in the absence of an agreement, property is community.
Community property is liable for the debts of either spouse incurred during marriage. Note that it is the property that is liable for the debts of the other spouse, not the other spouse personally. A creditor with a claim against the community can satisfy itself from community property, to the extent there is community property. That creditor cannot reach the separate property of the non contracting spouse. Nor can that creditor follow the non contracting spouse after the marriage.
Upon a division of community property in the course of a divorce, the property ceases to be community property. Thus the debts of the marriage don’t follow the former community property unless the debt was incurred by the spouse who gets a particular asset, or the debt was assigned to that spouse in the divorce.
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