Advice on Credit Card Debt and Community Property Law

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 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 Debt Help page. I hope this information helps you Find. Learn & Save.




MMary Cafarelli, Feb, 2012
I live in Florida and have $50,000 in credit card debt. I became ill with a chronic intestinal problem about 5 yrs ago & was not able to work full time. The bank where I worked could not give me a part time job & Iwas not able to find one during a very bad job market, especially here in Florida. I was 63 at the time so I filed for Social Security. I receive $826 and also a small pension of $70 from a bank. That I had worked for many years prior. I tried to file for Bankruptcy in 2010 but by a very slight margin was denied. I could have filed for chap. 13 but the amt they determined was more than I had coming in so I asked to stop the Bankruptcy. The lawyer I was using suggested this option because I was not joint on any of my husband's accounts nor was I a joint mortgagee on our house. I think that I will be served with a judgement from one of my creditors very soon and am sick over it. They have been calling me for some time but have never left messages, but yesterday they did. They have even called my 87 yr old father in law who just lost his wife and is still mourning her loss and upset him greatly. I plan on calling them today. Can they garnish my husband's wages or Bank Accounts? He is not on any of the delinquent accounts and I am not on any of his. What should I do when I receive a judgement? Any help will be appreciated. Thank you
BBill Admin, Feb, 2012
You mentioned you reside in Florida, which is a common law state, but you ask your question on a page devoted to community property law. The content on this page does not apply to Florida residents.

Please see the Florida Collection Laws page, which is tailored to Florida residents with debt-related questions. See also Served Summons and Complaint for a general discussion of how a person should respond to a summons. Please ask any follow-up questions you may have on one of those two pages.
TTim R, Jan, 2012
An unsecured creditor has a judgment against my father. My father was the primary cardmember and I was added as an additional user. My father never used the credit card to make any purchase; I incurred 100% of the purchases charged solely for my own benefit and those for my business. Neither my father, mother nor the community benefited from the debt whatsoever (although my father is liable as the primary cardmember under the card agreement for any debts incurred regardless of who incurred them). Given what you state is correct in the answer above with respect to what qualifies as community debt, would I be correct to assume that my mother (the non-debtor spouse) is not liable for such debt because it does not qualify as debt that benefited the community and is therefore not considered community debt? I never knew that for debt to be considered community debt, it basically has to pass a "smell test", so to speak. The question is, who determines this? A judge? A creditor? The debtor? And when?
BBill Admin, Jan, 2012
Each state with a community property law answers your question differently because no two community property statutes are the same. State supreme and district courts also weighed in on your question when interpreting state statutes. My original answer above stated the rule you mentioned in a soft, squishy manner deliberately because no hard-and-fast rule applies for all states.

I realize my answer here does not answer your question. I am not answering your question because I want you to consult with a lawyer in your state who has either contract law or family law experience. He or she will analyze the facts of your case, and apply your facts to relevant case law on that issue.

"Smell tests" are a bit of legal slang that slips into legal decisions. It is shorthand for, "The judge will know it when he or she sees it."
MMary Ponce, Sep, 2011
Hello, My husband purchased a foreclosed home at an auction before we got married, and the previous homeowner made a "deal" with him that he would pay rent, and eventually buy back the home. My husband welcomed this deal because he subsequently lost his job. The tenant was very unreliable, making payments here and there, and finally stopped. My husband has had him evicted, and is trying to sell the home short sale. He also has credit card debt, that was from a card his father opened in his name an never paid, and doesn't have the money for. We live in Maryland, but plan to move to Texas in the near future (but don't know any lawyers or anyone there). I never received any benefit from these items. I have excellent credit. Will I be responsible in anyway? Thank you.
BBill Admin, Sep, 2011
Mary, I can't give you legal advice, but I will share my opinion. I do not believe you will be held responsible for credit card debt or the mortgage debt, if your name was not on the credit account or mortgage.

Consult with an attorney if you want an authoritative answer.
PPamela Serrano, Apr, 2011
I am married and live in CA which is a community property state. I purchased a second house in my name only in NV (I purchased this house for my sister to live in. She made all the mortgage payments and claimed the tax credits this was essentially her house I basically just signed the papers). This 'second' house has now foreclosed. Could this qualify for the community property exception and be considered my separate debt since house did not benefit my husband? On addition there was never any sort of income or tax credit for neither me or my husband. Which brings me to my second question is there any way to make this house NOT be classified as an investment house? If a house is a principal residence for a relative is it still considered an investment house? I would greatly appreciate any answers or comments. We are devastated by whats happening. We face a deficiency judgement all for a mistake I made.
BBill Admin, Apr, 2011
You have several issues you are mingling here that need separation, in my opinion. Consult with a California lawyer who has experience in family law to get a precise answer to your question. You may be able to insulate your spouse from liability of the source of the funds for the Nevada house was your separate property. However, that is a question a lawyer who reviews the Nevada's home finances will answer. Ask the lawyer if Chapter 7 bankruptcy is an option for you.
MMaria, Nov, 2010
Hello, I live in Maryland and my husband has credit card debt that he incurred here. We are thinking of moving to California. Can his creditors come after me for his debt once we move to California? Will it help if I divorce him first before we move to CA? And what will happen in the event of his death? Can creditors come after me for his debt even if he has passed on?
BBill Admin, Nov, 2010
The answer to your first question is very fact specific, and accordingly I want you to consult with a California attorney who has experience in family law. He or she will read your husband's credit card agreement and research case law in California for cases that have set precedent on this issue. California Family Law 910-915 applies on first blush, which would give you both liability, but again I want you consult with a California family lawyer before you file for divorce for the sole purposes of avoiding the debt liability.