What is Community Debt in a divorce?
Community debt is debt incurred during a marriage by a spouse which is generally related to the marriage and both spouses may be liable to pay. In a community property state (like Washington), a debt incurred for the common interest of the spouses or for the interest of the other spouse is a community debt. A community debt can be paid from the community property (for e.g, home and furniture, income earned by either spouse etc.) and from the separate property (inheritances, gifts etc.) of the spouse who incurred the debt. If both spouses received a benefit from the debt, it can be collected from the separate property of both spouses as well as the community property. In community property states, the presumption is wealth or debt created during the marriage is equally shared by the spouses. Courts in Washington assumes that the debt gathered by the two spouses for the duration of their marriage (from the date of marriage to the date of divorce) is equally shared by both spouses regardless of whether one spouse is responsible for most of the debt. The key here is this is only applicable for the duration of the marriage. So, for example, if you incur a debt, such as a student loan, while you’re single, and then get married, it won’t automatically become a joint debt unless your spouse signs on to an account as a joint account holder. Majority of the courts in community property states assume the rents, profits, and issues of separate property remain separate. If a spouse claims a certain property is separate, it is up to that spouse to prove the property was acquired with separate funds or it was acquired as an inheritance or a gift.
Washington law allows community creditors to reach the the community property of both spouses and the separate property of the spouse who signed the contract. One spouse is not liable for the separate debts of the other (RCW 26.16.200). However, Washington law allows community creditors to reach the the community property of both spouses and the separate property of the spouse who signed the contract. Couples in community property states like Washington can sign an agreement with each other to have their debts and income treated separately. Signing a pre- or post-nuptial agreement like this can make sense for a couple before one spouse goes into business. You can also sign an agreement with a supplier stating that the creditor will look solely to your separate property for repayment of any debt, essentially removing your spouse’s liability for any obligation or debt from the contract – if you can get the other spouse to agree. In case there is a child of divorce, the Washington State outlines that he obligation of a parent or stepparent to support a child may be collected out of the parent’s or stepparent’s separate property, the parent’s or stepparent’s earnings and accumulations, and the parent’s or stepparent’s share of community personal and real property. Funds in a community bank account which can be identified as the earnings of the non obligated spouse or nonobligated domestic partner are exempt from satisfaction of the child support obligation of the debtor spouse or debtor domestic partner.
What kind of property can be used to pay debts?
In a community property state like Washington, creditors of one spouse can go after the assets and income of the married couple to make good on joint debts (and remember, in a community property state, most debts incurred during marriage are considered joint debts). Creditors can go after joint assets in a community property state no matter whose name is on the title document to the asset. For example, a business owner’s name may not be on the title to her spouse’s boat, but in most community property states, that won’t stop a creditor from suing in court to take the boat to pay off the business owner’s debts.