May 8th, 2013

Bankruptcy and Divorce Part I: Most Creditors Can Come After Both Ex-Spouses for Community Debt

A competent Arizona bankruptcy lawyer and Arizona real estate lawyer knows that because Arizona is a community property state, debts incurred while married are the responsibility of both spouses, regardless as to who signed for the debt.

A common misunderstanding is that your creditors are bound by your divorce decree. The truth is that creditors could care less what is in your divorce decree. Your decree is between you and your ex-spouse, not between you and your creditors. For example, assume your ex-spouse agreed in your divorce decree to pay off the Chase credit card, the Toyota car loan, and the home equity line of credit. If he doesn’t pay those debts, any of those creditors can still come after you (in addition to your ex-spouse). And if your ex-spouse files bankruptcy, the creditors won’t be able to go after him at all. But they can still sue you. This is true even if your name isn’t on the credit card.

Of course, this rule only applies to debt incurred during the marriage. Any debt incurred by your ex-spouse before or after the marriage is considered that ex-spouse’s “separate debt”, and only that spouse is responsible for it.

As a side note, in most circumstances, a spouse is only responsible for mortgage debt if that spouse signed the promissory note, even if the loan was taken out during the marriage. Certain actions while married could arguably cause the non-signing spouse to become liable. But don’t forget that a mortgage lender may not be able to sue either spouse if the Arizona anti-deficiency statute applies.

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