Do the Rules Regarding Community and Separate Property Apply to Debts in Arizona?
How Are Debts Between Spouses Decided in Arizona
Yes, the rules are the same. For example, any debt owed by either spouse before marriage remains that spouse’s sole and separate debt. Debts incurred after service of the divorce petition are the separate debt of the spouse incurring the debt. There are many exceptions to these general rules. Sometimes complex issues arise when a creditor of one spouse attempts to collect a separate debt of a spouse by taking the separate property of the other spouse or the community property of both spouses.
The Arizona Supreme Court addressed the limits of a creditor in taking community assets or the separate property of the non-debt owing spouse to satisfy a premarital debt in the case of Forsythe v. Paschal. You should also read our in-depth article on the Arizona Court of Appeals decision in the SPQR v. Robertson case, or you may watch the video above about that case.
There are situations when one spouse owes a debt to the other spouse when, for example, a spouse loans the other spouse money from a separate property account. The Arizona Court of Appeals in the case of Johnson v Johnson held the divorce court is not authorized by any laws in Arizona to address loans between spouses. A separate civil lawsuit would have to be filed by one spouse against the other to collect upon any such personal loans between the spouses.
Is a Spouse’s Separate Property Liable for Community Debts
The Arizona Court of Appeals in the case of Union Bank v. Pfeffer held that a creditor might come after community assets but usually cannot come after the separate property of a spouse to pay a community debt. The exception to this general rule would occur if both spouses signed, for example, a promissory note to a creditor. In that situation, both the community and each spouse’s separate property could be taken by a creditor as they are binding both themselves and their community to the obligation.
Chris Hildebrand wrote this article about the division of debts in an Arizona divorce to ensure everyone has access to information about community property laws in Arizona. Chris is a family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through.