Arizona Divorce Debt in a Decree of Dissolution of Marriage
Arizona is one of nine states in the nation that is considered a community property state. This means that almost all property (both assets and debts) that are acquired during the time of a couple’s marriage will be legally recognized as community property and/or debt. What is the difference between community and separate debt? How is community debt actually divided? How do you enforce an order dividing debt in an Arizona divorce decree?
Arizona Divorce Debt | Difference Between Community and Separate Debt
Community debts are generally those debts incurred during the marriage or for the benefit of a community asset. Community debt is recognized as the liability of both parties equally. Separate debts are generally all debts incurred by either spouse prior to marriage or after service of the Petition for Dissolution of Marriage has occurred. Separate debt is recognized as the separate debt of only one of the spouses.
Determining which debts are community and which debts are separate is important in approach the division of those debts, as well as the division of marital property. After determining which debts are community property, the Court will determine how to equitably divide those debts between the parties, which is typically to divide community debt equally between the parties. Separate debts are assigned solely to the spouse accruing that separate debt.
Arizona Divorce Debt | How is Community Debt Divided
One of the riskier aspects of the division of marital property concerns the division of the community debt. In a perfect world, we would all have the funds available to pay off all of our debts, so we could start off post-divorce with a clean slate. This is not the case for most people. Although a court has the authority to divide community debt between the parties, the court does not have the authority to order either party to pay off the debt by a lump sum payment. This leaves the other party potential liable to the creditor who may come after him or her if his or her former spouse stops making payments as ordered.
It is important, therefore, to understand some strategies to consider when dividing community debt in an Arizona divorce. One strategy is to have each party responsible for the debts in his or her sole name, such that a wife would take all credit cards in her sole name and a husband would take all debts in his sole name. Any difference in the debt balances could be resolved in a couple of ways.
One option is to award the spouse with a larger amount of the community debt with a larger portion of the community assets in such amount as would equalize the division of community debt. If it appears the other spouse either has no ability to pay the debts assigned to him or her or it is proven he or she will simply refuse to pay any debts assigned to him or her, you may ask the court to assign all the debt to the responsible spouse and then equalize that inequality by giving him or her the same amount of community assets as he or she is assuming in debts with an additional assets being equally divided between the parties.
Arizona Divorce Debt | How To Enforce a Division of Debt in an Arizona Decree
Regardless what orders the court enters regarding the responsibility for community debt, both spouses are still legally liable for those community debts. Stated differently, a creditor is not bound by the court’s order regarding who is responsible for the debt because the creditor was not a party to the divorce case and, therefore, any rulings in the divorce case cannot be imposed upon a creditor.
If a former spouse fails to pay a debt assigned to him or her, you will need to enforce the court’s order to pay the debt as ordered. In order to do so, the innocent spouse would have to pay the debt his or her spouse was ordered to pay and then seek a judgment from the court against his or her former spouse for the amount paid to the creditor. The Arizona Supreme Court in the case of Proffit v. Proffit ruled that a person may not be held in contempt for his or her failure to pay a community debt because doing so would violate the constitutional prohibition against imprisonment for not paying debts.
The Proffit v. Proffit Ruling Explained
If you need help deciphering the laws pertaining to community and separate debt, please get in touch with Hildebrand Law. We would love to go over the related issues with you and aid you in protecting yourself from debt in an Arizona divorce. To learn more about how to protect your rights during your divorce, get in touch with our Arizona divorce attorneys. We are available to assist you immediately.