Community Debt can be Crippling in a DivorceNew Mexico is a community property state, which means that property acquired during marriage is considered jointly owned and any debt incurred during marriage is equally shared.  This debt is known as ‘community debt’.

Equal responsibility for community debt is presumed regardless of the amount of income either spouse makes.  Furthermore, responsibility for community debt can occur with the signature of just one spouse and without knowledge of the other spouse.

Exceptions to Community Debt

Exceptions to community debt are extremely limited
There are a few exceptions to the general rule providing some relief to the innocent spouse.  These exceptions are very limited.  There are limited exceptions for transactions where a signature is required for the validity of the debt.  Gambling debts are also generally excluded.  Tax liability in some cases may be excluded depending on the circumstances.  Student loans are typically considered the debt of the spouse that acquired the loan.   Depending on the circumstances, there may be other exceptions as well those these are extremely limited.

It often comes as a surprise to parties when they learn that they are fully liable on the debts of their spouse.  This realization is particularly painful when one of the parties has been irresponsible or reckless in spending.   The issue most often arises with credit card and other consumer debt.

Innocent Spouse’s Knowledge Of Debts

Lack of knowledge of debt or even attempts to prevent the debt from being incurred will not protect an innocent spouse in the absence of an exception.

The rule holds even though the other innocent spouse either did not know or even objected to the spending.  The community debt rules can be very hard on and seemingly unfair to the innocent spouse.

Unfortunately for the innocent spouse, creditors can rely on the community property and debt rules just as can the parties.  This means that creditors can go after both spouses for a debt.  In the event that one spouse is insolvent following a divorce, the creditor is free to go after the other spouse.

 

The harshness of the rule can be reduced in some cases where exceptions are found.  As such, it is very important to carefully analyze the marital debt for any possible exceptions.

Cutting Off Liability

There are a few options to minimize liability. However, even these will not protect against debt incurred prior to initiation of these safeguards.

There are not a whole lot of benefits to a legal separation over a divorce.  However, this is one instance where a legal separation may be necessary in case the innocent spouse does not want a divorce quite yet but needs protection from the other spouse.

There are other ways to try to limit liability.  These are not necessarily full-proof but will at least provide some protection and possible relief from creditors.

The most important first step is to notify any known creditors that you are not responsible for the debt.  This means alerting credit card companies and other creditors even though you were not on the application.

Secondly, you may request relief from the court requesting an order prohibiting the other spouse from running up debt.  This may allow you to recover from the other spouse in case of violation of the order.  However, it does not necessarily relieve you from liability to creditors since creditors are not parties to the divorce and are not bound by the court’s orders.

Finally, you might attempt to bifurcate the divorce proceedings.  Divorces take a long time due to the many issues such as child custody, child support, alimony, division of property and debt, and so on.  On the other hand, the dissolution of the marriage can be granted in a fairly timely manner while these issues are still outstanding.  If your spouse is running up debt and there is no expectation that he or she will abide by a court order to cease, then this may be an option.

Keep in mind that the debts run up before any of these actions are taken remain community property and you will likely still be held responsible in the event that your spouse is unable or unwilling to pay them.

Do Not Delay!

As might be surmised by the discussion above, it is important to take immediate action upon learning that your spouse is running up debt without your knowledge or approval.  Delay will likely result in your full responsibility for those debts under community property laws since you will gain relief, if at all, only for those debts incurred following protective measures.

Seek the guidance of an experienced divorce attorney to weigh your options.  And when you do, it is essential that you discuss your concerns with the attorney.  Your attorney cannot help unless he or she knows of your concerns and the need to take action.