Fact or Fiction: When you marry your spouse, do you really marry their debt too?

marrying-their-debt

It is often said that when one marries his or her spouse, he or she is also “marrying their debt.” Is that how it works in California, too?

It depends.

Family Code section 910 provides the following:
“(a) Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.

(b) ‘During marriage’ for purposes of this section does not include the period during which the spouses are living separate and apart before a judgment of dissolution of marriage or legal separation of the parties.”

So the community property acquired during the marriage can be used to satisfy any debt of either spouse acquired before the marriage. In this respect, spouses do indeed marry each other’s debts. Notably, child or spousal support obligations from previous relationships always count as debts incurred before marriage even as new child or spousal support payments become due during the marriage (See Family Code section 915).

There is, however, an important exception to Family Code section 910. Family Code section 911 provides as follows:
“(a) The earnings of a married person during marriage are not liable for a debt incurred by the person’s spouse before marriage. After the earnings of the married person are paid, they remain not liable so long as they are held in a deposit account in which the person’s spouse has no right of withdrawal and are uncommingled with other property in the community estate, except property insignificant in amount.

(b) As used in this section:

(1) ‘Deposit account’ has the meaning prescribed in paragraph (29) of subdivision (a) of Section 9102 of the Commercial Code.

(2) ‘Earnings’ means compensation for personal services performed, whether as an employee or otherwise.”

Under Family Code section 911, to the extent that one spouse’s community earnings (compensation for personal services performed) are put in a bank account isolated from any other community money and from the other spouse’s access, Family Code section 910 will not apply.

The meaning of “earnings” is a bit vague here and there is no case law clarifying its definition. Certainly, money earned from a W-2 job would qualify as “earnings.” But what about earnings from a business? Would it matter if the business clearly depended upon the spouse’s labor (i.e. a doctor) as opposed to a business where there is some capital investment? What about interest paid on the earnings held in the deposit account? These questions have yet to be answered definitively.

Finally, we come to the liability of separate property for the debts of spouses. Family Code section 913 reads:

“(a) The separate property of a married person is liable for a debt incurred by the person before or during marriage.

(b) Except as otherwise provided by statute:

(1) The separate property of a married person is not liable for a debt incurred by the person’s spouse before or during marriage…”

In other words, the separate property of a married person is generally not liable for a debt incurred by that person’s spouse at any time. There are some exceptions to this rule. Namely, as provided in Family Code section 914, a married spouse’s separate and community property is liable for the debts of another spouse incurred at any time if the debt was incurred for the necessaries of life (i.e. food, shelter, medicine). This even includes necessaries of life incurred after separation but before a divorce judgment is rendered.

The divorce attorneys at the Law Offices of Nancy J. Bickford are well-versed in dealing with debt issues that arise in California divorces. We practice exclusively in the area of family law and have extensive experience in all aspects of divorce litigation and related issues. Nancy J. Bickford is the only attorney in San Diego County representing clients in divorces, who is a Certified Family Law Specialist (CFLS) and who is actively licensed as a Certified Public Accountant (CPA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

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www.bickfordlaw.com