In a day when over half of marriages end in divorce and each spouse might pursue occupations that result in significant debt, the question of whether a spouse is liable to third parties for a husband or wife’s obligations can become essential. Typically, a husband or wife fails in business or in an investment and is confronted with aggressive creditors who quickly deplete the husband or wife’s assets. When might creditors seek to enforce a judgment against one spouse’s assets on the assets of the other spouse? This is the topic of this piece.
Before continuing, the reader should read the articles on Judgment Enforcement and Prenuptial Agreements.
Individually held property in California comes into one of two categories:
1. Community Property: Other than by gift or inheritance, all property and income obtained during marriage and prior to separation is presumed to be community property.
Property obtained during marriage via “gift, bequest, devise, or descend” (i.e., inter vivos or testamentary gift or intestate succession) is independent property of the acquiring spouse.
2. Separate Property: Property purchased prior to marriage as well as property acquired during the marriage that can be traced back to a prior acquisition.
Because California is a community property state, the law holds that the community estate shared by both individuals is accountable for any debt accumulated during the marriage by either spouse. All community property, which is divided equally between husband and wife, can be held accountable for one spouse’s debts.
However, unless the debts were incurred to secure needs of life (e.g., food, shelter, etc. ), separate property of either spouse will not be held accountable for the other’s obligations.
Regardless of whether one or both spouses profit from the debt, the community estate can be held accountable for any debt accumulated by either spouse previous to or during the marriage.
This does not include the nondebtor spouse’s earnings in relation to obligations incurred by the debtor spouse prior to marriage.
A married person’s independent property (including inheritances) is not liable for a spouse’s debts accumulated before or during the marriage.] The spouses have an obligation to assist one another, hence debts committed by one spouse during marriage must be for the purpose of ensuring essentials of life. Food, shelter, clothing, court fees, and attorney fees are all considered necessities of life in this context. In this case, the spouse of the person who assumes the obligation is also personally accountable for the loan. In this case, the nondebtor spouse’s separate property may be utilized to repay their spouse’s debt.]
In Robertson v. Willis, for example, the court held that the defendant and her husband’s communal property might be utilized to settle plaintiff’s obligation. However, because the defendant wife was not personally liable for the debt, she could not use her separate property to pay it.
“The property rights of husband and wife provided by statute may be amended by a premarital agreement or other martial property agreement,” according to the California Family Code. A postnuptial agreement is a legal document that explains how a married couple would divide their assets if their marriage ends in divorce in the future. Marriages in California that do not have a pre-nuptial or post-nuptial agreement share assets and income 50-50 in the case of divorce.
In California, creditors are not obliged to be notified when a post-nuptial agreement is created. However, if it is revealed that the post-nuptial agreement was made in order to obstruct or evade debt collection, fraudulent conveyance statutes may be enforced.
It is self-evident that a couple’s decision to engage into a marriage agreement can have a substantial impact on whether one spouse’s debts can influence the separate property of the other. Banks and other financial institutions recognize this and frequently require both couples to sign notes and other commitments, putting both spouses…and their separate property…at risk in the case of default. See our guaranty article for more information.
When negotiating a prenuptial or post nuptial agreement, some couples fail to grasp that the subject matter isn’t just about possible dissolution of marriage and property distribution; it can also have a significant impact on third parties’ capacity to collect judgments. When one spouse is participating in a high-risk business enterprise, the pair should carefully assess whether isolating and expanding one other’s separate property makes sense.
However, there are a slew of other difficulties that arise from the question of whether to minimize or remove communal property, ranging from tax considerations to the potential impact of a divorce. Before any far-seeing couple makes this vital decision, they should get professional accounting and legal assistance.
Can a creditor come after me for my spouse’s debts in California?
In fact, the community property is responsible for any obligations brought into the marriage by either partner as well as debts incurred during the marriage.
However, while the community property may be held liable for your spouse’s obligations, you are not personally liable if you did not incur the debt.
As a result, your separate property is inaccessible to your spouse’s creditor.
That creditor also cannot seize property you obtain after the marriage has ended.
Unless the judgment of dissolution awards you a debt, your spouse’s debts do not accompany you when the marriage ends.
Is surviving spouse responsible for credit card debt in California?
A surviving spouse in California can be held accountable for the debts of their deceased spouse, but there are some exclusions and limitations that limit the surviving spouse’s exposure and liability.
In circumstances when no probate estate has been opened, the California Probate Code covers a surviving spouse’s accountability for the debts of the deceased spouse.
Survivor spouses are personally liable for a deceased spouse’s debts, which are charged to both halves of the community property as well as the deceased spouse’s separate property that passed to the surviving spouse without administration, according to the California Probate Code.
The California Supreme Court defined the pertinent provisions of the California Probate Code that apply when a surviving spouse succeeds to a deceased spouse’s property without administration in Collection Bureau of San Jose v. Rumsey, stating:
Probate Code sections 13550 and 13551 make a surviving spouse personally liable for the debts of the deceased spouse, subject to certain exceptions and limitations, but only to the extent that such debts are chargeable against both spouses’ community property and the deceased spouse’s separate property passing to the surviving spouse without formal probate administration.
Section 13550 of the Probate Code states: “Upon the death of a married person, except as provided in Sections 11446, 13552, 13553, and 13554, the surviving spouse is personally liable for the debts of the deceased spouse chargeable against the property described in Section 13551 to the extent provided in Section 13551.”
Section 13551 of the Probate Code, on the other hand, specifies the sources from which the surviving spouse’s liability may be satisfied, as follows: “The liability imposed by Section 13550 shall not exceed the total of the following:(a) The portion of the one-half of the community and quasi-community property belonging to the surviving spouse under Sections 100 and 101 that is not exempt from enforcement of a money judgment and is not administered in the estate of the deceased spouse that is not exempt from enforcement of a money judgment and is not administered in the estate of the deceased spouse that is not exempt from enforcement of a money judgment and is not administered in the estate
(b) The amount of the decedent’s community and quasi-community property that transfers to the surviving spouse without administration under Sections 100 and 101. (c) The decedent’s separate property that passes to the surviving spouse without administration.”
Section 13554 of the Probate Code then explains that these debts may be pursued against the surviving spouse in the same way that they might have been enforced against the deceased spouse had he or she not died.
In plain English, a California surviving spouse can be held personally liable for the debts of the deceased spouse only if the debts are chargeable against both spouses’ community property and the deceased spouse’s separate property passes to the surviving spouse without the need for formal probate administration.
If the estate administration is started, the procedures that govern creditor claims in California probate apply.
Can you be held liable for your spouse’s debt?
In most cases, one is only responsible for their spouse’s debts if the debt is in both names. However, unless both the husband and wife are co-signers on the credit card account, one spouse will not be held liable for the other’s obligations on that account.
Can a lien be placed on my house for a spouse’s debt in California?
Yes. A spouse may place a lien on community property to protect their financial interests in the property as part of a divorce settlement to protect their property interests.
Similarly, if a judge grants you title to the marital home, you can ask for a lien to be put on the property in the amount of equity you owe.
A spouse can also have debts from other creditors in a community property state like California, and other creditors may be able to place a lien on a property you own jointly with your spouse to satisfy the debt.
Does my husband’s debt become mine?
Debts you and your husband accumulated before marriage are your sole responsibility; but, debts you incur together after the wedding will be shared equally. It’s important to know how much debt you’re both bringing to the marriage, which debts you’re each liable for, and how you’ll handle the debt you take on as a pair before you tie the knot. Here’s some information to help you start the conversation.
How can I not be responsible for my spouse’s debt?
Saying you’ve divided your finances isn’t enough; actions speak louder than words. A court may rule that you should share debts as well if you approach assets and accounts as if they’re shared. Separate bank accounts, automobile and other loans should be taken out in one person’s name exclusively, and property should be titled to one person or the other. This reduces your exposure to your spouse’s creditors, who can only seize assets that are wholly hers or her part of jointly owned property.
Do I have to pay my deceased husband’s credit card debt?
The majority of the time, the answer to this question is no. In most cases, family members, including spouses, are not liable for their deceased relatives’ debts. Credit card debts, student loans, vehicle loans, mortgages, and company loans are all included.
Rather, any outstanding debts would be paid from the estate of the deceased person. As a surviving spouse, this means you won’t be responsible for paying anything toward the loan individually. Your spouse’s assets, on the other hand, could be used to pay off loans or other debts they’ve left behind.
Following your spouse’s death, a debt collector may contact you to confirm who they should contact about debt recovery. The executor of the estate is usually the person in charge of this. If your spouse had a will, it’s possible that they named an executor in it. If they don’t want you to be their executor, you can file a petition with the probate court.
Inventorying the deceased person’s assets, estimating their value, notifying creditors of their death, and paying any outstanding bills are all important aspects of the executor’s job. When there are no cash resources available, such as a bank account, the executor can liquidate assets to pay creditors.
Do I have to pay my husbands credit card debt when he dies?
When your spouse passes away, their debt is left behind, but that doesn’t mean you have to pay it. A deceased person’s debt is paid from their estate, which is essentially the sum of all of their assets at the time of their death. If your spouse has a will, the executor specified in the will is in charge of paying creditors from the estate. If your spouse died without leaving a will, a probate court judge will decide how their assets should be distributed and appoint an administrator to carry out those decisions.
In general, you are not liable for your spouse’s debts unless you had a joint credit account (which is different from being an authorized user on your spouse’s account); cosigned for a loan, debt, or account; or resided in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). (Alaska residents have the option of signing a special agreement to pick common property.)
In most places, spouses are jointly and severally liable for each other’s debts. However, rules range from one state to the next when it comes to community property. Consult an attorney versed with estate law in your state if you’re not sure what the law needs.
If you signed or cosigned hospital admission documents or medical treatment authorizations, you could be liable for any medical bills your spouse has that their insurance does not cover. This is determined by the laws of your state and the paperwork you signed.
Will you be required to hand over the proceeds of your spouse’s life insurance policy or access their retirement account to pay the bills if their assets at the time of their death don’t cover their debts? Certain assets, such as life insurance policies, retirement plans, brokerage accounts, and assets maintained in a living trust, are safeguarded from creditors and cannot be used to settle debts after a spouse passes away. Otherwise, the estate executor or probate administrator will prioritize creditors and disburse payments according to your state’s probate regulations until the money runs out. Some creditors will not be paid if there is not enough money to pay all of the bills.
Is a wife responsible for husband’s medical bills?
Do they share responsibility for their husband’s debts? Yes, wives are liable for their husbands’ medical costs accrued during the marriage.
Can you sue your spouse for not paying bills?
If an abusive partner (with whom you are not married) fails to repay money you lent him or her, or fails to make credit card or loan payments as promised, you may be able to sue the abuser in small claims court for the money.
Is a husband financially responsible for his wife?
The husband was obligated to support his wife under common law, while the wife was obligated to perform home tasks and other services for the husband. In general, courts were unwilling to prescribe a precise standard of support to be supplied by the husband while the family remained together, as in McGuire v. McGuire (1953). Family living standards were regarded a source of worry for the family, and the courts, for the most part, saw no reason to intervene in such marital affairs. Courts, on the other hand, can intervene by adopting the “doctrine of necessity.” A husband or wife could be held liable for the purchase of needed goods or services, such as food, clothes, housing, and medical and legal fees, under this approach. Similarly, regardless of her or his agreement or knowledge of the purchases, a spouse could be held accountable for the obligations and contracts of the other spouse.
In today’s world, all states oblige husbands to pay for their wives and children, and many states also impose comparable obligations on females. Even if partners are living apart but not divorced, debts accrued during marriage, particularly for needs, are usually considered joint debts. As a result, creditors can sue either spouse to recover debts. Debts incurred prior to marriage by one spouse do not become the responsibility of the other spouse in many states. Creditors may seek marital property if the original debtor is unable to pay pre-marriage debts. Following a divorce, debt is divided between the ex-spouses according to the state’s property rules. Debts are frequently distributed equally, especially when they are related with meeting basic needs. Regardless of the breakup, creditors can sue any ex-spouse.
A person also has the right to sue for personal injury or wrongful death on behalf of a spouse or kid. A surviving spouse has the right to claim compensation from the wrongdoer for the love, affection, care, services, companionship, and sexual connections that she or he is currently denied under common law rules. The term “consortium” refers to all of these facets of marital connections, and anyone who knowingly interferes with this relationship is liable for damages. Most courts require proof that the perpetrator intentionally or negligently damaged the spouse or child, resulting in physical injury or death, in order to collect such compensation. Only married couples suffer from loss of consortium. Cohabitants who are not married may not be compensated for their losses. In wrongful death situations, the dead’s surviving spouse and children are usually entitled to compensation from the wrongdoer for the amount of future income that the deceased or incapacitated spouse would have contributed. In the case of a child’s misbehavior, parents are not accountable under common law unless the child’s crimes were way assisted by a parent. States, on the other hand, began holding parents accountable in civil lawsuits for damages caused by their children around the 1970s.
Can creditors take my wife’s house?
It may be a very stressful period for the entire family when a spouse goes bankrupt.
If your spouse declares bankruptcy, a Trustee in Bankruptcy is appointed to take custody of the bankrupt’s assets and sell them to pay creditors when possible. This includes property, which may include the family home, which is not a Bankruptcy Act protected asset.
The Bankruptcy Trustee must approach the realization of your spouse’s interest in the home with compassion while preserving creditors’ rights and interests.
If your spouse is the sole owner of the property, the Trustee will sell it.
When a home is owned jointly (for example, by a husband and wife as joint tenants), the joint tenancy is automatically severed if one of the joint tenants files for bankruptcy.
From joint tenants to tenants in common, housing ownership will shift.
The bankrupt spouse’s part of the family home can then be sold by the bankruptcy trustee. If the non-bankrupt spouse cannot afford to buy out the bankrupt’s share, the entire house will be auctioned, and any money left over after creditors have been paid will be split equally between the bankrupt and the non-bankrupt spouse.
In this instance, the Bankruptcy Trustee will normally take the following steps:
- Allow the non-bankrupt spouse to purchase the bankrupt spouse’s share of the property.
- Invite the non-bankrupt spouse to work with the Trustee to promote and sell the property on agreed-upon terms.
- If the non-bankrupt spouse and the Trustee cannot agree on the sale of the property, the Trustee might approach the Court to appoint a statutory Trustee for Sale over the co-owners’ interest in order to force a sale.
Even if one spouse is not bankrupt and has not participated in any manner to the bankruptcy, the appointment of the statutory Trustee necessitates the sale of the home. While the Court may frequently try to assist the non-bankrupt spouse by allowing them time to relocate and find another property, the property will usually be sold.
The Bankruptcy Trustee has broad discretion in how the property is sold, and will usually give the bankrupt a few weeks to find alternative housing. After paying off any remaining debt, the Trustee will only sell the house if there is equity (money left over). Creditors are paid out of the proceeds of the forced sale.
The rights of the mortgagee (the bank with whom you have a mortgage over your house) are unaffected by bankruptcy, and if mortgage payments fall behind, the bank can still take steps to sell the property. After one spouse becomes bankrupt, you should continue to make mortgage payments if you are able.
It’s critical to understand that one of the implications of bankruptcy could be the sale of your family home to pay creditors, so you should get legal guidance.
