What is community property and how does it affect my bankrupty?

property 3Community property is, in short, the property you and your spouse acquired while you were married.  It includes any real estate and property 5personal property that you bought while you were married.  So cars, clothes, jewelry, furniture are all considered community property if they were acquired while you were married.  Real estate acquired during the marriage is considered community property in the same way.

It gets a little more complicated when you have a piece of real estate that was yours alone prior to the marriage.  If you get married after you bought the property your new spouse can gain (over time) a community interest in your real estate.

Real estate requires the regular and continuous paying of fees for maintenance, taxes, and even the mortgage payment.  Even if you continue to pay these yourself (with no contribution from your new spouse) your spouse is getting a growing community interest as you make those maintenance payments.

The money you use to pay these ongoing property expenses are community funds even if the funds come from income you earn alone.  This is because every dollar you earn during your marriage is half owned by your spouse.  This works both ways as every dollar your spouse earns is half yours too.  Therefore if you are married and the only one working and you pay these expenses out of your income alone on property that was yours before the marriage, your spouse is still getting a gradual community interest.

So when it comes time to file bankruptcy the trustee will want to know if you are married.  If you are then community property issues arise and he will ask questions about any property you or your spouse own individually or together.  If your spouse files bankruptcy and you do not your spouse may have a community interest in your real estate.  This will be true even if your spouse did nothing to and for the property.

These issues can get complicated so you need an attorney to analyze your property and your spouse’s to see if there are any community property issues.  Property can and will be seized and sold by a trustee if there is any value owned by the person filing bankruptcy if that value is not properly exempted.

Community property does not include property that you alone inherited and that you have kept segregated and separated from your spouse’s property.  If you have not commingled that property with your spouse then that property can be considered separate and not community for bankruptcy and other purposes.

But if you inherited real estate it may have started out as separate property but it may lose its separate property nature over time.  Again as you pay on it you may be giving your spouse a community interest even in separate property that was inherited by you.

There are other issues related to community property such as whether you gifted property to a spouse by putting the title it in their name.  If you do put a spouse on title then there is a presumption of gift and depending upon how title is held that property will probably be considered half owned by the spouse.  It would then lose its separate property status.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

Private property photo courtesy of hworks.  House photo courtesy of danzoO8.

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