Arizona Property Division: Community Property Vs. Separate Property and Debt
The A.R.S. 25-215 is the regulation for how community and separate property will pay for community and separate debt. Every separation case that leads to divorce will endure separate and community debts and properties. Because these are what will be used to pay outstanding bills, it is crucial that each person understands its nature before filing.
Community properties and debts are the ones acquired during marriage.
Separate properties and debts are the ones acquired before marriage.
The simple definition of separate property is listed above. For a better understanding, we have broken it down into two categories:
- Property owned before marriage or property acquired after filing for separation that leads to divorce
- Property acquired by gift, inheritance, or intestacy (when a relative dies without a will and you must divide the wealth among family members)
The rule for separate property is that it cannot pay off the debts of the other spouse, so a question we often hear is this: Does this mean creditors can use separate property to pay off community debt?
No. Most often, creditors will sue the person responsible for the debt, leaving them with two options:
- File with a response of why they should not be held liable for the certain debt
- Pay off the debt and sue the other spouse for reimbursement of payment
It is a court order to pay any debts assigned to you by a divorce settlement. If left unpaid, you will be held accountable for contempt of court.
As you can see, dealing with community and separate properties and debts is very complex. Some couples chose to sign prenuptial agreements (prenups) before entering into marriage. Prenups can change everything we just discussed. They can allow separate property and debts to be viewed as community property. The couples who have prenups and choose to divorce have the option to negotiate all properties and debts until an agreement is achieved. They have the ability to change the stated rules and submit a practical and fair contract declaring their settlement.
The law states that the separate debt that is being paid off by community property must have been incurred after September 1, 1973. This situation does convey some limitations. The individual using the community property as payment can only receive a certain percentage of it. The amount is the ratio of debt that would be considered separate property if the spouse were single. As a result, the indebted spouse only gets a partial disbursement of the community property to put towards expenses and must pursue further means to pay the remaining.
Liability to Spouse’s Debt
Most commonly, one spouse is never liable for the other’s separate debt. Creditors do not have the option to use a spouse’s separate property to pay for another spouse’s separate debt. So, if the spouse is unaware of what type of properties and debts he or she has, financial problems can transpire. It is essential for individuals to be aware of their assets and to make sure they undergo thorough communication throughout their divorce case or misunderstandings are bound to take place.