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Community Property • Analysis of Creditor's Rights
CPROP#059
Legal Definition
Where the debt was not incurred for the benefit of the community, the debt is satisfied in the following order: (1) from the debtor spouse's separate property, then (2) from community property.
Plain English Explanation
If a debt is not for the community's benefit, first the debtor's separate property is used to pay it. If that is not enough, then community property can be used.
Hypothetical
Hypo 1: Bob secretly buys a fancy motorcycle without Amy's knowledge, using his inheritance money. He crashes it and owes a huge repair bill. Result: The repair shop must first seek payment from Bob's inheritance (his separate property) before touching the couple's shared funds.
Hypo 2: Bob incurs a gambling debt, which Amy knows nothing about. Result: The casino must first look to collect from Bob's personal assets. Only if those are insufficient, they can claim against the couple's joint assets.Hypo 3: Amy and Bob jointly decide to remodel their home, but the contractor isn't fully paid. Result: Since this debt benefits both Amy and Bob (the community), the contractor can immediately seek payment from both the community property and either spouse's separate property.
Hypo 2: Bob incurs a gambling debt, which Amy knows nothing about. Result: The casino must first look to collect from Bob's personal assets. Only if those are insufficient, they can claim against the couple's joint assets.Hypo 3: Amy and Bob jointly decide to remodel their home, but the contractor isn't fully paid. Result: Since this debt benefits both Amy and Bob (the community), the contractor can immediately seek payment from both the community property and either spouse's separate property.
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 for the benefit of the community, whose property is available to creditors attempting to satisfy the debt?
