Using Separate Property to Pay Community Debts in Arizona
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Some people want to know about the effect of using separate property to pay community debts in Arizona. The Arizona Court of Appeals in an unpublished decision in the case of Stevens v. Stevens provided the answer to that question.
In the Stevens case, the husband owned a home prior to the parties’ marriage. That home was the husband’s sole and separate property because it was owned by him prior to the marriage and he did not add the wife to the deed on the home after the marriage.
Soon after the marriage, the husband withdrew money from a HELOC (“home equity line of credit”). The parties used the money from that HELOC loan to live on. Sometime later, the husband filed for divorce.
Community Property Presumption in Arizona
When the divorce case went to trial, the divorce judge concluded the HELOC loan was the husband’s sole and separate debt because he gifted to loan proceeds to the community. The Arizona Court of Appeals disagreed with the divorce court’s decision on that issue.
The Arizona Court of Appeals concluded that the law in Arizona is that all debts incurred during a marriage are presumed to be community debts, citing the prior Arizona Court of Appeals’ decision in the case of In re Marriage of Flowers. Since the money was borrowed on the HELOC during the marriage, that debt is presumed to be community property in Arizona.
Use of Separate Property to Pay Community Debts in Arizona
Likewise, it does not matter that the debt was secured by the husband’s sole and separate property. The Arizona Court of Appeals cited to an earlier decision in the cases of Johnson v. Johnson and Hammett v. Hammett that held the presumption that all debt incurred during marriage is community regardless if that debt is secured by the sole and separate property of one of the spouses so long as the loan proceeds were used to benefit the community.
The Arizona Court of Appeals also rejected the wife’s argument that she did not know husband took the loan out to fund their living expenses. The Court of Appeals indicated a spouse does not have to have personal knowledge about a loan taken out by the other spouse for the debt to be considered community property, so long as the money was used for the benefit of the community.
Reimbursement of Separate Property With Community Property
There is another take-away from this case. Prior to the divorce being finalized, the husband sold his sole and separate home. The balance of the HELOC loan was paid off when the home was sold. The wife argued the payment of the balance of the HELOC loan from the proceeds from the sale of the husband’s sole and separate home constituted a gift to the community.
The Arizona Court of Appeals also rejected that argument as well. In doing so, the Arizona Court of Appeals cited to the case of Bobrow v. Bobrow where the Court of Appeals concluded that, in most cases, a spouse who uses his or her sole and separate property to pay a community debt is entitled to reimbursement for those payments from the community. As a result, the Arizona Court of Appeals concluded the husband was entitled to reimbursement of his separate property from the community.
Interestingly, the Arizona Court of Appeals did not address whether the wife had a defense to the husband’s Bobrow claim of reimbursement for using his separate property to pay a community debt. Specifically, the Arizona Court of Appeals announced a defense to Bobrow claims in a divorce in the case of Barron v. Barron.
If you need information about community property laws in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property attorneys have over 100 years of combined experience successfully representing clients in divorce cases in Arizona.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property case around today.
Arizona Family Law Attorneys in Scottsdale and Tucson Arizona
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Chris Hildebrand wrote the information on this page about using separate property to pay community debts in Arizona to ensure everyone has access to information about community property laws in Arizona. Chris is a divorce and community property 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 in a divorce.
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