Advice on Credit Card Debt and Community Property Law
My wife (we live in CA) has about $160,000 in credit card debt, will I be held responsible for it in case of default?
My wife (we live in California) has about $160,000 in credit card debt all in her name -- more than$160,000. At this point there is no way it can be paid back. She has not worked in 8 years, yet the creditors have sent her credit card after credit card using the "household income" question on the applications -- a true $175,000 a year. I am in the auto sales business. It has slowed down drastically and is causing big problems for us besides the fact that we cannot borrow against our houses any more. Some credit card limits were upwards of $25,000 per card. My question is, will they try and come after me and my "WAGES" being that I am not any where on a single credit card of hers? There is literally nothing of equitable value to go after either. The other house we have is in foreclosure and the house we are in now is over $200k upside down. I just do not want them trying to sue me and garnish my wages. With a single house payment of almost $5,000 a month, two car payments, and three kids there is no way we could make it if they were able to garnish my wages. Any advice would be so much appreciated and valued.
- California is a community property state.
- Debts incurred by a California spouse creates liability for the community.
- Consult with a California bankruptcy attorney to learn what debts can be discharged.
California is a "community property" state, which means that many assets and obligations of one spouse acquired during the marriage become "community" assets or obligations. Generally speaking, this can mean that one spouse can be held liable for the debts of the other spouse even if his or her name was not on the account which resulted in the debt. However, even in a community property state, one spouse has the ability to create "non-community" assets and obligations. Generally speaking, for a debt to be considered community property, the debt must have been incurred to benefit the community; for example, if the debt were incurred to purchase items for the marital home, it would likely be considered community debt. However, if the debt were incurred to purchase a boat which one spouse never used and which was kept separate from other community assets, the debt may not be considered community debt, and the non-debtor spouse may therefore not be liable.
It is possible that your spouse’s creditors could name you as a co-defendant in any lawsuits they bring against your spouse to collect on these debts; if they obtain a judgment against you, they may be able to garnish your wages, levy your bank accounts, and/or place liens on your property. However, if you think that this debt does not qualify as community debt, you could challenge your liability in court and may be able to avoid a judgment being entered against you. Also, in most community property states, I have not seen creditors file suit against the spouses of credit card holders as a matter of course, so your wife's creditors may not even file suit against you if they do decide to pursue legal action against her. Unfortunately, they do have the legal ability to sue you, so you should be prepared in case a suit is filed against you.
I would encourage you to consult with an attorney to discuss your potential liability in this case and what steps you can take to protect yourself. To read more about community property in general, you can visit Wikipedia's Community property Web page.
In a worst-case scenario, if your wife’s creditors do come after you for the payment of these debts, you may have no choice but to file for bankruptcy protection yourself. I would recommend that you and your wife to consult with an experienced bankruptcy attorney licensed to practice law in California. While a consumer’s ability to file for Chapter 7 bankruptcy protection is usually based on his or her household income, which in your case would likely disqualify your wife from filing Chapter 7 bankruptcy, there are some situations in which a spouse can file for protection excluding the other spouse’s income. Unfortunately, I do not know enough about your financial circumstances to tell you what options are available to you and your wife in bankruptcy.
If, after consulting with a bankruptcy attorney, you determine your wife qualifies to file for bankruptcy protection, that would likely be the easiest solution to resolving such a large amount of debt. If you would like to read more about bankruptcy, I encourage you to visit the Bills.com Bankruptcy page.
Even if your wife cannot file for Chapter 7 bankruptcy, which should discharge all of these credit cards debts, she may be able to file for Chapter 13 bankruptcy protection, which would allow her to establish a repayment arrangement with her creditors. Chapter 13 payments are also usually based on one’s household income, but this requirement does not apply to all situations, so you should again consult with a bankruptcy attorney to discuss the options available to you.
For more information for consumers struggling with debt, I encourage you to visit the Bills.com Debt Help page. I hope this information helps you Find. Learn & Save.