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Community Property • Credit Acquisitions
CPROP#044
Legal Definition
Funds borrowed during the marriage, and goods purchased during the marriage, are presumptively community credit. However, despite this presumption, borrowed funds (and credit purchases) are classified according to the primary intent of the lender. Thus, the presumption can be overcome by evidence that a lender relied primarily on the borrower's separate property in granting the loan or extending the credit.
Plain English Explanation
If money is borrowed or items are purchased during a marriage, those are typically considered shared property. But the intention of the lender when making the loan can overcome that assumption. In other words, assets gained and debts taken on during a marriage are usually shared. But that doesn’t mean all money borrowed or items purchased are automatically co-owned. If a lender provides funds relying mainly on only one spouse's separate, individual property, then the borrowed money could stay that spouse’s separate property (and separate obligation to pay it back). So the presumption that acquisitions during a marriage are community property can be defeated by evidence about the lender’s primary intent. The purpose is to balance community ownership interests while respecting separate property used to secure loans.
Hypothetical
Hypo 1: Bob and Amy are married. They decide to buy a fancy car. They apply for a car loan, and the bank approves it based on Bob's significant savings, which he had before marrying Amy. Result: Even though Bob and Amy are married, the car loan may be considered Bob's separate debt because the bank primarily relied on Bob's separate income and assets, not the couple's combined financial situation.
Hypo 2: Amy and Bob are married. Amy wants to start a biotech startup. She applies for a loan, stating that it will be her personal venture. The lender approves the loan, relying on Amy's credit history and her inheritance from her aunt. Result: The loan for Amy's startup is considered Amy's separate debt because the lender's decision was based on Amy's individual creditworthiness and inheritance, not the marital assets.
Hypo 3: Bob decides to buy a new gaming computer. He uses a credit card that he and Amy got after marriage. The credit card company approved the card based on their combined income. Result: The debt incurred for the gaming computer is presumed to be a joint debt, as the credit was extended based on their combined financial situation as a married couple.
Hypo 2: Amy and Bob are married. Amy wants to start a biotech startup. She applies for a loan, stating that it will be her personal venture. The lender approves the loan, relying on Amy's credit history and her inheritance from her aunt. Result: The loan for Amy's startup is considered Amy's separate debt because the lender's decision was based on Amy's individual creditworthiness and inheritance, not the marital assets.
Hypo 3: Bob decides to buy a new gaming computer. He uses a credit card that he and Amy got after marriage. The credit card company approved the card based on their combined income. Result: The debt incurred for the gaming computer is presumed to be a joint debt, as the credit was extended based on their combined financial situation as a married couple.
