Individual credit in a community property state

[adorax]

I will be getting divorced in the next year or two after nearly 30 years of marriage. Although I have not worked outside the home in several years and have no income of my own right now, I do have excellent credit in my name only but carry no balances on anything. My husband has a spending problem and has one CC, in his name only, that he constantly charges up to the maximum. I have spent YEARS trying to keep it paid off on a monthly basis but when that becomes impossible I make only the minimum payment. Since my husbands job includes an annual bonus we have been using this to pay off the card balance each year, only to see it run up to the maximum again within 6 months or so....it's a never ending battle and one of the main sources of trouble for us. He has talked to a therapist about it but isn't getting anywhere. When we divorce we plan to go through a mediator and I will be insisting on him taking full responsibility for that (and any other) CC balances that are in his name only. What he buys is not stuff for the family but lots of clothes and toys for himself, etc.

My question is that since we are in a community property state can he insist I be responsible for half is debts even though the creditors don't even know I exist? I'm not even an authorized user and never have been. Is there anything I can do to protect myself from him (non legal stuff...I'll be seeing a lawyer soon) or am I just going to have to accept that whatever he does while we are married will be my responsibility too? We have a joint mortgage, a joint checking account, and one CC that is used for overdraft protection on that account only (no balance). I've separated everything else and canceled what I could and have the credit bureau reports for us both that I keep clean.

[GregB]

The laws vary by state quite a bit. Here is what I know from my experience in a Community Property State, California.

During the time you are married, the two of you are one legal entity regarding assets, debt, etc. That means that if either of you goes out and buys something, it belongs to both of you. If you get a debt, that also belongs to both of you.

When you finish the property settlement of a divorce, your assets and debts are divided up. The creditors don't care about that much. If both your names are on something, like your mortgage, you are both liable. If only one of your names is on the credit, you are both still liable, but not quite as directly. If this CC is in his name only, they will probably consider it only his debt, at least for awhile. There are a few "joint" CC, but most are in ONE persons name. The other spouse can be an AU, but has no rights other than use of the card. They still can come after the AU spouse for the debt because when married you are both jointly responsible.

Debts are normally separated at a Date of Separation. However, all debts and assets are considered Community until determined otherwise, which can be stipulated during the divorce process, but really only becomes final at Property Settlement.

An irresponsible spouse can trash the credit of the responsible spouse pretty easily.

It seems the card in his name only. Keeping it near the limit so that he can't charge more could be an advantage until separation. He could go out tomorrow and get a CC that you don't know about, charge it to its limit, and if that is determined to be prior to separation, it is community debt. Having his credit report does help because you know he probably hasn't already gotten a CC that is hidden from you.

What exactly do you mean by getting a divorce in a year or two? If you are planning to put yourself in a better position for a later divorce, this might get fairly complicated as there are many options. This is particularly true if you wish to protect yourself from being taken down by an irresponsible spender.

Message Edited by GregB on 03-02-2010 07:42 PM

Message Edited by GregB on 03-02-2010 07:53 PM

[O6]

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@mladyd wrote:

I will be getting divorced in the next year or two after nearly 30 years of marriage. Although I have not worked outside the home in several years and have no income of my own right now, I do have excellent credit in my name only but carry no balances on anything. My husband has a spending problem and has one CC, in his name only, that he constantly charges up to the maximum. I have spent YEARS trying to keep it paid off on a monthly basis but when that becomes impossible I make only the minimum payment. Since my husbands job includes an annual bonus we have been using this to pay off the card balance each year, only to see it run up to the maximum again within 6 months or so....it's a never ending battle and one of the main sources of trouble for us. He has talked to a therapist about it but isn't getting anywhere. When we divorce we plan to go through a mediator and I will be insisting on him taking full responsibility for that (and any other) CC balances that are in his name only. What he buys is not stuff for the family but lots of clothes and toys for himself, etc.

My question is that since we are in a community property state can he insist I be responsible for half is debts even though the creditors don't even know I exist? I'm not even an authorized user and never have been. Is there anything I can do to protect myself from him (non legal stuff...I'll be seeing a lawyer soon) or am I just going to have to accept that whatever he does while we are married will be my responsibility too? We have a joint mortgage, a joint checking account, and one CC that is used for overdraft protection on that account only (no balance). I've separated everything else and canceled what I could and have the credit bureau reports for us both that I keep clean.

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You need to consult an attorney.

Community property as it relates to cerdit card debt can be very complex.  In some community property states all debt -- whether or not you are a co-applicant on the account -- is attributable to either spouse.  Usually, however, the state will stipulate that debt from an individual account can only be attributed to the other spouse  if the debt was for basic living expenses of the sppuse in whose name the account was opened.  This means that if your future ex used the CC to buy, say, beer, that is not a basic living expense.  Clothes would be.  Sometimes the distinction is not very clear.  And often the CC companies will just refrain from analyzing each purchase and a) automatically leave you alone or b) automatically hound you to death.

[guiness56]

I live in WA state, which is a community property state.

My understanding is that in order for it to be considered "community property" it had to be acquired after the marriage.  Which seems as it should be.

However, my daughter had her income tax refund off-set due to her husbands debt on a government card that he got years before they got married.  She called the IRS and questioned it and was told that as long as they were married, it did not matter when the debt ocurred. 

Is this true?  Doesn't seem right. 

[O6]

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@guiness56 wrote:

I live in WA state, which is a community property state.

My understanding is that in order for it to be considered "community property" it had to be acquired after the marriage.  Which seems as it should be.

However, my daughter had her income tax refund off-set due to her husbands debt on a government card that he got years before they got married.  She called the IRS and questioned it and was told that as long as they were married, it did not matter when the debt ocurred. 

Is this true?  Doesn't seem right. 

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It doesn't seem right, but each state is different and exceedingly so.  There are attorneys whose whole practice revolves around community property issues and even they mess up and call them wrong sometimes.

Generally debts incurred prior to marriage are not commingled.  I assume -- I am not certain -- that the same applies also in WA.  That said, the IRS operates on a totally different platform.  Perhaps your daughter's filing status had something to do with it.  Again, just guessing. 

Oh, wait a second ... there are times even in the best of states that premarital assets can become commingled.  For example, you own a home prior to marriage but it then becomes the marital home.  At that point, usually, it becomes community property.  But I'm not sure how the IRS can calculate a tax obligation that way.

[recoverychick]

My ex husband applied for a loan purchased our home in WA  2 weeks prior to our getting married.  I learned it while on a visit to "potential" new home.  When closing date the realtor placed my maiden name and his on the deed stating there was a $10 fee to add it when we got married or we could add it after.   Gullible person I was ( at the time) I said we could add it after the wedding.   When it was time to add it, my ex refused and sated he got the loan and bought before the marriage so it would be his alone.

Needless to say, I'm happily divorced now.

We were living in SC when I divorced him.  When our current home was sold, he was awarded the full down payment for the WA house from the proceeds of the it's sale, even though I brought the entire down payment in a cash deposit to our bank account after the wedding. This was due to it being his sole asset because it was purchased prior to the marriage. Sucked.

Still SC is an equitable property state and they did right by me (kind of ) in  the divorce except for the fact that I had to pay for him to stay in the house while he stretched out the divorce for 18 months (another story, I was the primary wage earner).  I was the primary wage earner but he was a spendaholic.  We held no joint ccs and had not joint loans except for the mortgage and heloc.   I wasn't an aa and there were only 5 purchases made for on his cards (totaled less than 2K).  He had almost 65K in cc debt and petitioned that I pay half.  It was unsuccessful and I got back monies for damage done to the house for lack of upkeep plus, the heloc payments the separation papers required him to pay (I worked for the bank at the time).  He's somebody else's money problem, now.

I'd check with your lawyer.  Good luck.  God bless.  Stay strong.  It's worth it.

[Noah_Bodie]

First, talk to a lawyer. Pronto. Find out from your lawyer what all the ins and outs of the laws in your state are because community property laws vary a lot from one state to the next. You are in a situation where you need to be extremely pro-active, aggressive and insistent. Anytime you hear the words "Oh, the chances of that happening are ..." you need to stop and ask "Yeah, OK, but what if it does happen?"

Second, I think anything you can accept the responsibility for, even all of the debt, then you should do that. Better that you have the debts all in your name and he pays alimony to you. That way you know with certainty that the debts will get paid. The problem with insisting he take full responsibility, and the responsibility of paying the debts, is that he has NOT shown responsibility and that's why, perhaps among other reasons, you are divorcing him. So, yes you can insist he take responsibility, but it does not sound like a very good idea, IMHO. You might have better luck pushing a rope or pulling stick. You would be able to sue him for failing to pay the bills, but that would not help your credit at all and the CAs would be able to attach derogs to your CRs, call and bother you, sue, et al.

On the house, while this is a down market, I don't know where you are or when you bought. However, anything you can liquidate would be for the best. If one or the other of you could make the mortgage payment, then one could do a quitclaim deed, the person keeping the house would have to refinance in their own name and give the other person their share of the equity, and then the house would be the sole responsibility of that first person keeping the house.

Close the joint checking account, split up any money in the account evenly, and go open something in your own name only.

Close the CC used for overdraft protection.

Insist that he close ALL the CCs in his name and PIF. Depending upon the laws in your state, it may not matter and if he defaults on them then the CAs will come after you, legally.

Job loss, medical bills, and divorce are the Big Three of BK, and they tend to play a HUGE role in an otherwise good person's good credit going straight downer the porcelain convenience. Your soon to be EX sounds like a huge financial liability, and you need to get anything and everything closed out that you possibly can.

Again, first, talk to a lawyer and if you're happy with them and think you can work with them then retain them as your legal counsel. Then do what they say.

[adorax]

Thank you everyone for responding. It's pretty much as I suspected and I will follow my lawyers advice regarding STBE's debt.

I've spent some time the last few days reading all the forums here and I've learned a great deal. Your knowledge is appreciated!

[guiness56]

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@O6 wrote:

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@guiness56 wrote:

I live in WA state, which is a community property state.

My understanding is that in order for it to be considered "community property" it had to be acquired after the marriage.  Which seems as it should be.

However, my daughter had her income tax refund off-set due to her husbands debt on a government card that he got years before they got married.  She called the IRS and questioned it and was told that as long as they were married, it did not matter when the debt ocurred. 

Is this true?  Doesn't seem right. 

---

It doesn't seem right, but each state is different and exceedingly so.  There are attorneys whose whole practice revolves around community property issues and even they mess up and call them wrong sometimes.

Generally debts incurred prior to marriage are not commingled.  I assume -- I am not certain -- that the same applies also in WA.  That said, the IRS operates on a totally different platform.  Perhaps your daughter's filing status had something to do with it.  Again, just guessing. 

Oh, wait a second ... there are times even in the best of states that premarital assets can become commingled.  For example, you own a home prior to marriage but it then becomes the marital home.  At that point, usually, it becomes community property.  But I'm not sure how the IRS can calculate a tax obligation that way.

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I don't know either. But, it seems it would not be safe to be married in a community property state unless you both had pristine credit.

They have to draw the line somewhere.

[O6]

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@guiness56 wrote:

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@O6 wrote:

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@guiness56 wrote:

I live in WA state, which is a community property state.

My understanding is that in order for it to be considered "community property" it had to be acquired after the marriage.  Which seems as it should be.

However, my daughter had her income tax refund off-set due to her husbands debt on a government card that he got years before they got married.  She called the IRS and questioned it and was told that as long as they were married, it did not matter when the debt ocurred. 

Is this true?  Doesn't seem right. 

---

It doesn't seem right, but each state is different and exceedingly so.  There are attorneys whose whole practice revolves around community property issues and even they mess up and call them wrong sometimes.

Generally debts incurred prior to marriage are not commingled.  I assume -- I am not certain -- that the same applies also in WA.  That said, the IRS operates on a totally different platform.  Perhaps your daughter's filing status had something to do with it.  Again, just guessing. 

Oh, wait a second ... there are times even in the best of states that premarital assets can become commingled.  For example, you own a home prior to marriage but it then becomes the marital home.  At that point, usually, it becomes community property.  But I'm not sure how the IRS can calculate a tax obligation that way.

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I don't know either. But, it seems it would not be safe to be married in a community property state unless you both had pristine credit.

They have to draw the line somewhere.

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You don't even want to get into the issue of commingled funds in a community property state divorce.  Even PricewaterhouseCoopers would be hard pressed to save you.