Liabilities

Question 1

Liabilities Generally

Answer 1

CP Liability

• Liable for any debt incurred by either spouse before or during marriage
• CP Liability ends upon separation
• Divorced/widowed spouse can request reimbursement for other spouse’s liabilities paid w/ CP (unless waived)– must exercise right within 3 years of date she has knowledge of debt satisfaction (or date of spouse’s death).

SP of a married spouse not liable for debt incurred by spouse.

Question 2

Capital Improvements (Real Property)

Answer 2

SP used to improve other’s spouse’s SP
- Spouse is entitled to reimbursement for contribution unless transmutation in writing or written waiver of right to reimbursement.

SP used to improve CP:
- SP spouse may claim reimbursement from community

CP used to improve SP:
- Community is entitled to reimbursement or enhanced value (whichever is greater)

Question 3

Credit Purchases + Loan Proceeds

Answer 3

When one or both spouses borrow money before/during marriage

During Marriage:
- Debt and property acquired are presumed to be CP when lender doesn’t rely primarily rely [or solely] on purchaser’s SP in extending credit.

Before Marriage:

• Debt and property acquired are SP.
• Pro rata apportionment: If CP funds are used to pay down an installment purchase made before marriage, the CP estate acquires “a pro-rata interest in proportion to the amount the principal is reduced by CP payments.”
• Not reimbursable: interest, tax, or insurance payments.

Question 4

Debts Before Marriage (Child Support + Spousal Support)

Answer 4

• SP of debtor spouse + CP are liable for debts incurred before marriage, including child + spousal support
• SP of non-debtor spouse isn’t liable for other spouse’s premarital debt

Exception
- Non-debtor spouse may shield her wages (CP) from recovery on these debts by placing her wages in a strictly SP bank account that blocks access to debtor spouse.

CP right of reimbursement for child + spousal support payments if:

• No waiver
• SP of debtor spouse was available to pay debt at the time payment from CP was made.

Question 5

Debts During Marriage

Answer 5

Generally

• SP of debtor spouse and CP are liable for debts incurred during marriage
• SP of non-debtor spouse is not liable for debts of other spouse

Necessaries of Life Exception:

• Each spouse is personally liable (CP + SP) if:
  1. Debt was incurred before separation
  2. Debt was to pay for the necessaries of life– food, housing, clothing, and med care

Common Necessaries of Life Exception:

• Each spouse is personally liable (CP + SP) if:
  1. Debt was incurred before divorce (not separation)
  2. Debt was to pay for common necessaries of life– expenses required to sustain human life

SP Reimbursement:
- Non debtor spouse’s SP reimbursable if either CP or SP of debtor spouse was available @ time of payment

Question 6

Allocating Debts @ Divorce

Answer 6

• Court assigns debts and liabilities
• Goal to ensure property is available to meet obligations of spouses
• Equal division rule–> CP debts divided equally.

Exceptions:

• If CP debts> CP assets, court may assign excess debt in its discretion, taking into account each party’s relative ability to pay
• Student loans are assigned to spouse who took out the loan
• Debts during marriage that were not for the benefit of the community are assigned to debtor spouse.

Question 7

Tort Liability

Answer 7

If spouse commits tort during marriage, SP of tortfeasor spouse and CP are liable (see below for order of access)

CP Liable for SP

• If tort occurred during activity taken for benefit of community, then claim paid from CP and then SP of tortfeasor spouse.
• Ex: Car accident while buying groceries.

SP Liable Before CP
- If tort occurred during an activity not for the benefit of the community, then claim paid from SP of tortfeasor spouse and then CP.
Ex: Car accident while driving to mistress’s house.