Community Debt and Bankruptcy Issues
in Divorce
This information is a general overview of community debt and
bankruptcy issues related to dissolution (divorce). A lawyer is still the
best source of advice for your specific case.
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Washington State is a community property state. This means that
when two people get married they create a marital community.
Property acquired during the marriage by either spouse usually belongs
to the marital community. Debts incurred during the marriage by either
spouse are also usually the responsibility of the marital community.
I’m in a Registered Domestic Partnership. Does This Memo Apply
to Me?
Yes. Under Washington law, registered domestic partners are treated
like spouses.
What Is Community Property?
Property acquired during the marriage by either spouse, or both
spouses, is usually community property. Either spouse, acting alone,
may manage and control community property as if it were his or her
own property. But there are a few exceptions to this. For example, both
spouses must be involved in order to buy or sell real estate.
The statute (law) that defines community property is RCW 26.16.030.
“RCW” stands for “Revised Code of Washington.” You can read it
here: http://apps.leg.wa.gov/rcw/default.aspx?cite=26.16.030.
What Is Separate Property?
Property acquired before a marriage is an individual’s separate
property. Gifts and inheritances to one spouse during a marriage are
separate property, too. Property acquired after separation is also
separate property.
Separate property is protected from debts owed by the marital
community. A spouse has complete control over his or her separate
property. In other words, the spouse that does not own the separate
property has no control over it. It is a good idea not to mix separate
property and community property. If they are mixed (“commingled”)
so much that you can’t tell which is which, separate property can
become community property.
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Separate property is defined in RCW 26.16.010 and 26.16.020:
http://apps.leg.wa.gov/rcw/default.aspx?cite=26.16. The two laws are the same, but the first one
is for spouses, and the second one is for registered domestic partners.
What Is Community Debt?
Debts created during the marriage are typically community debts. The assumption is that these
debts were incurred for the benefit of the marital community. For example, debts from medical
bills, education of the children, or repairs to the family home are all community debts. The
Washington law that talks about family expenses being community debt is RCW 26.16.205. You
can read it here: http://apps.leg.wa.gov/rcw/default.aspx?cite=26.16.205.
Under Washington law, your name does not have to appear on a debt for you to be liable. In fact,
you do not even have to be aware of the debt at the time it was incurred to be liable. All that is
required is that the debt must have been for the general benefit of the marital community when it
was incurred. Debt incurred during marriage that is not for the benefit of the marital community
is a very narrow category. You should consult a lawyer to determine if specific debts could be
defined this way.
What Is Separate Debt?
Debt that was acquired before marriage and/or was generated from the separate property of a
spouse is separate debt. An example is repairs for a house acquired by one spouse before the
marriage. Debt acquired after separation is also separate debt. Separation means that you have no
intention of getting back together. Separation usually happens when one spouse moves out or
files for divorce. Separate debt is not the responsibility of the marital community. In other words,
you are not responsible for your spouse’s separate debts, and he or she is not responsible for your
separate debts.
Community property usually can’t be used to pay separate debts. One exception is that
community property can be used to pay maintenance (alimony) and child support.
Also, one spouse can’t bind the other spouse’s separate property unless it’s for family expenses.
Family expenses include expenses for the education of the children.
What if We Don’t Live Together but We’re Still Married?
In order for a debt to be a community debt, there must be a marital community in existence.
Once you and your spouse choose to separate and physically do so, the marital community does
not exist. You do not have to start a legal separation or dissolution (divorce) proceeding to be
physically separated for community debt purposes. If you are physically separated and do not
later resume the marital relationship (get back together), you should not be liable for the debts
of your spouse during that period.
But you will be liable for debts incurred by your spouse on accounts that bear your name even if
you are separated. For example, if your spouse buys a new car in his or her name after you are
separated, the car is his or her separate property and separate debt and you are not liable. But if
your spouse uses your joint credit card to make purchases, you will be liable for those debts,
even if you are physically separated when they are incurred.
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If you and your spouse are physically separated and/or thinking about divorce, you should check
any accounts that bear your name. You may be legally liable for any debt that is incurred if your
name continues to appear on the account. To avoid liability for new charges, you must contact
the creditor (preferably in writing, while keeping a copy for your own records) and have your
name removed from the account. This should end your liability for future charges, but probably
not for past charges where your name was listed as a responsible party on an account. If a
creditor refuses to close a joint charge or credit card account (because there is a balance), you
may ask your spouse to transfer the balance he/she has agreed to pay to a credit card in his/her
name alone or you may ask the creditor to freeze the account, so that your spouse cannot
continue to incur charges.
How Can We Divide the Debt in Our Divorce?
Under Washington law, the court that enters a decree in a dissolution (divorce) proceeding must
fairly divide the debts between the parties. If the parties can agree on how the debts should be
divided, they may ask the court to approve the agreed division. If the parties cannot agree, they
may ask a court or other person (mediator, arbitrator, etc.) to divide the debts.
Whether or not the debt division is agreed, a court is required to follow some rules when dividing
debts, such as these:
→ Separate debts should be the responsibility of the spouse who incurred the debt;
→ Community debts should be divided fairly between the parties;
→ The whole dissolution (debts and assets, community and separate, etc.) must be fair to
each party.
The court will usually approve an agreed division of the debts unless it is very unfair to one
party. The first rule above is important because a spouse should not be asked to pay more of the
community debt just because the other person has large separate debts to pay. The third rule
above is important because a court will usually consider asset division when deciding about the
debt division.
What if My Ex-Spouse Doesn’t Pay the Debts He or She Was Ordered to Pay?
The debt division entered by the court is an agreement between you, your ex-spouse, and the
court, defining who will pay off which debts. The creditor is not part of this debt division and the
creditor does not have to follow it. No matter who is ordered to pay a community debt in a
dissolution or separation proceeding (even if agreed by the parties), both parties are still
liable to the creditor for the community debt. In other words, if your ex-spouse fails to pay the
debts he or she was ordered to pay in the dissolution, the creditor can come after you and the
creditor is not required to stop collection just because of the debt division in the divorce decree.
This may seem unfair, but actually makes sense if you think about it this way: Let’s say you lend
$100 to your cousins Amy and Beth, who are starting a business. Each signs a written note, to
you, to be liable for the full $100. You lend it to them because although each cousin alone is less
than totally reliable, each should be good for about $50. After a couple of months, Beth decides
to leave the business. Amy proposes that she keep all the assets of the business, and all of the
debts (including the loan to you). Beth agrees. Eventually you approach Amy to collect the $100.
Amy says she cannot pay you. You then ask Beth to repay the note. Beth replies, “I am no longer
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liable to pay you – Amy and I agreed she would take the debt.” Your ability to collect your $100
has now been limited by an agreement in which you had no part! This is unfair to you because
both Amy and Beth agreed to repay you and you have not agreed to anything different. This
example shows why the law does not change the creditor’s rights when there is a divorce. Like
Beth, the divorcing parties cannot change the rights of creditors by their agreement with each
other.
This does not mean that the debt division in the divorce decree is worthless. If your ex-spouse
doesn’t pay and you are forced to, you can sue him or her for damages (money) and contempt of
the decree.
What Happens When My Spouse or I File Bankruptcy?
When a person cannot pay their debts, filing for bankruptcy may be necessary. Filing for
bankruptcy means you place your financial affairs under the control of the bankruptcy court. A
“bankruptcy trustee” helps the court decide which debts to pay first and which debts to
discharge. Discharged debts are dismissed by the court because the debtor has no means to pay
the debts.
If it is likely you and your spouse will get a divorce and your marital community has a lot of
debt, it may be wise to file for bankruptcy before starting a divorce proceeding. Filing for
bankruptcy may simplify the divorce by clearing out some of the debt and making it easier to
negotiate how the remaining debts should be divided. It may be difficult to even consider doing
anything together during this time, but a joint filing does not require you to live together. Many
joint filings can be accomplished without any real contact between the parties, and may be the
cleanest and most economical solution to debt problems. It is often cheaper to file a joint
bankruptcy instead of having each person file separately. But if what is good for one spouse isn’t
good for the other, each spouse may need a lawyer, even for a joint filing.
When one or both spouses file for bankruptcy, all the community property becomes a part of the
bankruptcy estate and is available to pay community debts. If your ex-spouse files for
bankruptcy after your divorce, you will still be liable for the community debts your spouse
cannot pay, and you may not have as much community property to pay them. On the other hand,
if there aren’t many community debts, but your spouse has large separate debts or debts that are
not dischargeable in bankruptcy, then you may not want to join in the bankruptcy. Whether a
debt is dischargeable in bankruptcy may depend on the type of bankruptcy (for example, Chapter
7 or Chapter 13). The laws about bankruptcy are complicated – it is a good idea to talk to a
lawyer about whether you should file for bankruptcy at all, whether you should file together or
separately, and when the best time is to file.
What Is an Automatic Stay?
In legal terms, a stay acts as a delay or a short-term-freeze on legal obligations for a period of
time. If you or your spouse files for bankruptcy, an automatic stay immediately prevents
creditors from collecting on most debts for the length of the stay. The automatic stay does not
stop other types of proceedings, though.
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The stay does not affect any criminal actions against the person filing for bankruptcy.
The stay does not affect any charges of domestic violence.
The stay does not apply to a civil action for paternity (parentage).
The stay will not stop your divorce proceeding and will only interfere to the extent that it
is necessary to determine how property will be divided. This means that the superior
court can finalize your divorce first, and then the bankruptcy court can finish the
bankruptcy and the property division later.
The automatic stay does not apply to domestic support obligations – maintenance
(alimony) and child support. In other words, if your ex-spouse files for bankruptcy,
although he or she may be temporarily relieved from some creditors, he or she cannot
stop paying domestic support.
The stay does not apply to an action for modification of domestic support obligations, or
modification of parenting plan.
If the stay does not apply to a particular situation, that case will proceed as usual.
The law about automatic stays is at 11 U.S.C. § 362(b)(1), § 362(b)(2)(A), and § 362(b)(2)(B).
“U.S.C.” stands for U.S. Code. It is federal law. The number 11 is the “title” number. The
symbol § is the section. You can read the statutes here: http://www.law.cornell.edu/uscode/text.
Click on “Title 11 – Bankruptcy” to browse, or use the search box.
Can My Ex-Spouse Stop Payments to Me by Filing Bankruptcy?
Even if your ex-spouse files for bankruptcy, he or she can’t stop paying domestic support
obligations like alimony and child support. For other types of payments, like property
settlements, it depends on the type of bankruptcy. For Chapter 7 bankruptcy, your ex-spouse
probably can’t stop making the payments. But for Chapter 13 bankruptcy, he or she can probably
stop making payments after completing a bankruptcy repayment plan.
1) Support Obligations – Maintenance (Alimony) and Child Support
During bankruptcy the people seeking bankruptcy can ask that their debts be “discharged”. A
discharged debt is dismissed by the court because the debtor has no means of paying. But unpaid
domestic support obligations are non-dischargeable and have priority over all other unsecured
debts. An unsecured debt is not secured by any property. This means that if you default on the
debt (don’t pay it), the creditor can’t take anything of yours unless he sues you in court and wins.
Credit card debt is an example of unsecured debt. On the other hand, secured debt is connected
to property (collateral). If you default on a secured debt, the creditor can take the property. For
example, a creditor could repossess your car or your house.
Domestic support obligations are debts that result from an order of the court for payment to a
spouse, former spouse, or child of the debtor. In Washington State, these include maintenance
(alimony) and child support. Sometimes other types of expenses, such as mortgage payments and
health insurance, also qualify as domestic support obligations. If your ex-spouse files for
bankruptcy and he or she is behind on support payments, you have to file a proof of claim form
with the bankruptcy court to claim the back support. This form is available at
http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/BK_Forms_Current/B_010.pdf.
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The law that says domestic support obligations can’t be discharged in bankruptcy is 11 U.S.C. §
523(a)(5). You can read it here: http://www.law.cornell.edu/uscode/text/11/523. The law that
defines domestic support obligations is 11 U.S.C. § 101(14A). You can read it here:
http://www.law.cornell.edu/uscode/text/11/101.
2) Non-support Obligations – Property Settlements
In a Chapter 7 bankruptcy, non-support obligations from a divorce or separation are nondischargeable. A debt that is non-dischargeable means that your ex-spouse is still responsible for
it despite the bankruptcy.
Some debts arising from property settlements that are not dischargeable in a Chapter 7
bankruptcy are dischargeable in a Chapter 13 bankruptcy. The court’s decision depends on
whether the debt is a support obligation or a property settlement. In a Chapter 13 bankruptcy,
support obligations can’t be discharged, but property settlements can be discharged. The way
your divorce decree and settlement are written could make a big difference in how the court
interprets your agreement. Therefore, it is a good idea to get legal advice during your divorce to
help you plan for the effects of bankruptcy on your divorce settlement.
If your ex-spouse owes you support or a property settlement in your divorce, you should be listed
as a creditor on his or her bankruptcy petition and should receive notice from the bankruptcy
trustee of the initial meeting of creditors (this is called a 341 meeting). This notice should
include information on the deadline for filing a claim. Even if you do not receive notice, if you
know your ex-spouse is petitioning for bankruptcy, you should file a claim to protect yourself.
The law that says non-support obligations can’t be discharged is 11 U.S.C. § 523(a)(15). You
can read it here: http://www.law.cornell.edu/uscode/text/11/523. The law applies to Chapter 7
bankruptcy but not Chapter 13 bankruptcy. Laws about trustees are at 11 U.S.C. § 704(a)(10)
and 11 U.S.C. § 1302(b).
3) Non-support Obligations – Other Creditors
Some debts that are normally dischargeable in bankruptcy become non-dischargeable as to the
ex-spouse if they are included in a dissolution decree. For example, say that a husband agrees to
pay back $1000 in credit card debt in a divorce. The wife agrees in the divorce decree that she
will not be responsible for the debt, even though she was a co-signer on the card. The husband
may be able to discharge the debt in a Chapter 7 or Chapter 13 bankruptcy. If he discharges it in
a Chapter 7 bankruptcy and the credit card company later goes after the wife for the debt, she can
ask the husband for reimbursement. But if he discharges the debt to the credit card company in a
Chapter 13 bankruptcy and the credit card company later goes after the wife for the debt, she will
probably not be able to go after him for reimbursement.
If the bankruptcy court allows your ex-spouse to discharge marital debts that he or she was
supposed to pay under your divorce decree, you can return to divorce court and ask that the
amount of support you receive be increased because your financial circumstances have changed
and you are now responsible for additional debt, or because you are not receiving property you
were owed.
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Avoiding Common Mistakes
Here are some steps you can take to protect your interests:
Get Creditor Information as Quickly as Possible. If you and your spouse have
separated, you should make a list of your creditors right away. Get information from your
spouse, through the discovery phase of the dissolution, or from a credit report. Don’t just
guess who your creditors are; find out who they are for certain.
Notify Creditors Promptly and in Writing that You Will Not Be Liable for Future
Debt. You don’t want to get into costly and lengthy litigation about when you separated
and what you are liable for. A simple certified letter to a creditor can save you a lot of
time and expense in the long run.
Don’t Agree to Pay Your Spouse’s Separate Debts or More Community Debt to
Offset Their Separate Debts. Remember that your spouse’s separate debts are their
obligation, and most courts will not really consider those separate debts when dividing
community debts.
Don’t Defend Against or Ignore a Collection Action Based on Your Dissolution
Decree. Many people fail to answer or respond to collection lawsuits because they think
their divorce decree protects them from the collection. It doesn’t. As noted above, you
cannot change the creditor’s rights based on your dissolution.
Consider a Joint Bankruptcy Filing Before You Proceed with Dissolution.
Remember that a joint filing does not require you to live together. Many joint filings can
be accomplished without any real contact between the parties, and may be the cleanest
and most economical solution to debt problems. But if what is good for one spouse isn’t
good for the other, each spouse may need a lawyer, even for a joint filing.
Quickly File Any Objections to Discharge When You Receive the Notice of
Bankruptcy. If you are concerned that your spouse is trying to discharge debts that he or
she took in the divorce, don’t delay! Waiting too long can be the difference between
eating groceries and eating the debts.
Consult an Attorney or Other Legal Service. These general principles are helpful, but
divorce and bankruptcy can be complicated and can have serious consequences. Every
case is different, so it is best to talk to a lawyer.
Related Resources
NOTE: The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) changed
many bankruptcy laws in 2005. Make sure any information you find was written after that or has
been updated since then.
The United States Bankruptcy Courts website has a lot of information:
http://www.uscourts.gov/FederalCourts/Bankruptcy.aspx. The “Bankruptcy Basics” handbook
describes the bankruptcy process and explains the differences between the two most common
types of bankruptcy, Chapter 7 (liquidation) and Chapter 13 (adjustment).
The Washington LawHelp website, www.washingtonlawhelp.org, has useful memos and links.
Click on “Consumer & Debt.” Then click on “Bankruptcy.”
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Legal Voice memos, www.LegalVoice.org, go to Tools to Help You or call (206) 621-7691 to
request a copy:
Enforcing Your Divorce Decree: Financial and Property Issues
Living Together Contracts for Couple Who Cannot or Choose Not to Marry
How to Find a Lawyer
Revised Inessa Baram-Blackwell, 05/03/12
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