Marriage certainly runs a little deeper in some states than others. If you live in a state that honors the “community property” law, then you can very well expect that you will be sharing a lot more of your life with your spouse.
Community Property in the United States
The Community Property law is not applicable in all States. Only married couples living in the following States are affected: California, Washington, Alaska, Arizona, Nevada, Texas, Idaho, New Mexico, Wisconsin and Louisiana. Among all of these, it is only in Alaska that the couple signs to be under this law. Given this option, most couples choose not to sign.
Other States operate under the “Common Law” property or otherwise known as the Separate Property. This means that anything the spouse acquires is theirs alone. Unless of course, it is meant for the children or an overall family necessity – then it is considered as being in joint ownership of the couple.
There are States that does not only consider a marital union. Even couples joined by a civil ceremony and domestic partnerships of the same sex can be under the community property as long as that union is considered an equivalent of legal marriage in that state. These include California, Washington and Nevada.
How Does Community Property Affect a Married Couple?
The community property is a type of matrimonial regime that basically refers to the joint ownership of legally married couples. While it is different in every state, the general rule is, anything that the couple will acquire during their marriage is considered joint property. That includes real estate properties, assets, income, cash, and even debts. However, anything that either of the spouse receives individually that is in the form of a gift or inheritance will remain to be their sole property – regardless of their marital status. Sole ownership is also in effect for all properties and assets that either of the spouses have earned prior to the marriage. The court automatically considers all properties to be of joint ownership – unless it can be proven otherwise.
Another important consideration is that property system does not exclude couples permanently living in a state that practices the common law of property. If an asset or property that acquired while they are married is located in a state that upholds the community property, then it is considered to be of joint ownership unless proven otherwise.
Community Property and Debt Ownership Between Couples
In terms of debt acquisition during the course of the marriage, if the couple lives in a state that honors community property, that financial obligation is equally owned by husband and wife. But in other states under the common law, it remains to be the borrower’s alone.
It is also possible that a debt be converted when the spouse of the borrower agrees to co-sign the joint account of the pre-marital debt. This includes student loans and other personal loans taken by the borrower. That will make it a joint debt between the couple. Some states have meticulous methods in finding out if a debt is co-owned or not. Factors like the purpose of the debt, how it was spent and when it was used are considered by the court.
When liquidation of property is needed to pay off a financial obligation to a creditor, community property also comes into play. The creditors of a borrower can go after joint properties of the spouse – whether they are still together or living separately. However, these can only be done if the debt is co-owned – otherwise, it is protected from liquidation.
For bankruptcy filing, even if only one spouse files for Chapter 7 to declare themselves bankrupt, all joint debts of the couple will be discharged.
Removing your spouse from the liability of a debt that you will make is possible even under the jurisdiction of community property. You can indicate that prior to signing an agreement with the lender. Of course, all parties must be in agreement for this to transpire. Also, prenuptial and postnuptial agreements can take effect to protect the properties of each couple – especially before going into business.
If you wish to consult a financial expert about community properties and everything you need to learn about joint debts, give us a call. NationalDebtRelief.com is here to help you out. You can fill out the short form found on this page and we will have someone get in touch with you as soon as possible.