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Can Community Assets be Used to Satisfy Marital Debts?

In California divorce cases, courts are tasked with resolving disputes regarding issues such as property division, spousal support, and the custody and financial support of any minor children. One of the most heavily litigated matters in a divorce involves the division of marital property upon divorce.

In the United States, property division issues are governed by either “equitable division” or “community property” rules, depending on the jurisdiction where the divorce was filed. In California, principles of community property govern how the parties’ respective rights and responsibilities are distributed with regard to marital assets and liabilities.

California’s Community Property Rules

Under California law, the community estate of a married couple is subject to an equal, fifty-fifty division between spouses upon divorce. The California Family Code defines the “community estate” as comprised of both community property and quasi-community property.

All property that a married couple acquired during their marriage qualifies as “community property.” That means that any asset that the couple purchased, or otherwise started owning, after getting married and before the date of their final separation is deemed their “community property.” Additionally, all property that would otherwise be considered community property had the couple acquired it in California is called “quasi-community property” and is treated the same way as community property.

Generally, any asset that a spouse owns is presumed to be community property unless they can demonstrate by clear and convincing evidence that the asset is their sole and separate property. Under California law, all property that a spouse acquired before marriage or after the date of separation constitutes separate property and is not subject to equal division upon divorce. Also, any property acquired through gift, bequest, or devise (kinds of inheritance) is considered the separate property of the recipient.

California courts tasked with determining how to divide the property and assets of a divorcing couple must first determine the character of an asset as community or separate property.

The Use of Community and Separate Property to Satisfy Marital Debts

The debts that spouses incur can be similarly characterized as community or separate debts. Generally, the community estate is liable for all debts the spouses incur during or before the marriage. However, if they are kept separate, a spouse’s earnings from work are not liable for debts the other spouse incurred prior to the marriage, despite the fact those earnings qualify as community property. By keeping your earnings in a separate bank account that your spouse cannot access and withdraw from, creditors cannot reach those earnings in an attempt to satisfy a debt incurred by the marriage.

Of course, one’s premarital debts cannot be satisfied from the other spouse’s separate property. The separate property of a spouse can typically be held liable for their separate debts. However, if the couple incurs debt to acquire basic necessities such as food, shelter, and clothing, a spouse’s separate property may be reached to pay off that debt because spouses owe each other a duty to provide one another with adequate financial support.

Bremer Whyte Brown & O’Meara Provides Comprehensive Legal Counsel

If you are looking for the professional advice of an attorney with experience in California family law matters, you should contact Bremer Whyte Brown & O’Meara. Our legal team has valuable experience handling various family law cases, including proceedings concerning the characterization and division of marital assets and debts.

Please call us at (949) 229-8546 or contact us online to arrange for an initial consultation with a member of our highly skilled legal team.