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Community Property • Analysis of Creditor's Rights
CPROP#058
Legal Definition
Where the debt was incurred for the benefit of the community, the debt is satisfied in the following order: (1) from community property, (2) from the debtor spouse's separate property, and (3) if for necessities, from the non-debtor spouses separate property.
Plain English Explanation
When someone owes money because they bought something that benefits both partners in a relationship, there's a specific order to decide which property is used to pay off that debt. First, they'll use the property that both partners own together. If that's not enough, they'll use the property of the person who owes the money. And if the debt was for essential items, they might even use the property of the partner who doesn't owe the money.
Hypothetical
Hypo 1: Bob takes out a loan to buy a new family car which both he and Amy use for daily commuting and family trips. Result: The debt is for the benefit of the community, so it's first covered by any joint property or savings they have. If that's not enough, Bob's personal savings might be used, and if necessary, Amy's personal savings could be used as well.
Hypo 2: Bob incurs medical expenses after an accident, and the couple uses their joint account to pay for it. Result: Since medical expenses benefit the community (Bob's health), the debt is satisfied first from their joint account. If insufficient, Bob's personal savings would be next in line. Amy's personal savings could be tapped only if it's a necessity.
Hypo 2: Bob incurs medical expenses after an accident, and the couple uses their joint account to pay for it. Result: Since medical expenses benefit the community (Bob's health), the debt is satisfied first from their joint account. If insufficient, Bob's personal savings would be next in line. Amy's personal savings could be tapped only if it's a necessity.
Related Concepts
What are the most common type of debts incurred and how are they treated?
When a debt is incurred before marriage, whose property is available to creditors attempting to satisfy the debt?
When a debt is incurred during marriage, whose property is available to creditors attempting to satisfy the debt?
When debts are incurred NOT for the benefit of the community, whose property is available to creditors attempting to satisfy the debt?
