Division of Community Property and Debts

Division of Community Property and Debts

Community Property

Defined

All property acquired by husband and wife during marriage is presumed to be community property unless it fits one of the descriptions set forth in the next tab for “Confirmation of Sole and Separate Property and Debts.” The acquisition of community property ceases once a spouse serves a petition for legal separation, annulment or dissolution of marriage as long as the petition eventually results in a decree (as opposed to being dismissed). A.R.S. § 25-211.

Division of Property

The court is required by law to divide all marital property. Property acquired outside of the state by either spouse during marriage is considered community property if it would have been community property if acquired in Arizona. Marital property not divided by the decree is held by the parties as tenants in common, each with an undivided one half interest. In the decree, the court shall assign each spouse his or her separate property. The court is to divide property equitably but not necessarily in kind. The division is to be without regard to marital misconduct. However, the court may consider excessive and abnormal expenditures, destruction, concealment, or fraudulent disposition of marital property in making the division. A.R.S. § 25-318.

Community Debts

Defined

With limited exceptions that will be explained below, nearly all debts incurred during a marriage are presumed to be community debts, for which both spouses are responsible. A.R.S. § 25-214(C). With limited exceptions, debts intended to benefit the marital community are considered community debts. Overcoming that presumption requires the party trying to assert that the debt is not community to present clear and convincing evidence that the debt in question is not community. Even if no benefit was actually received by the community, the Court may find the debt to be community.

There are also certain categories of debts that require both spouses’ signatures in order to bind the community, such as the purchase of real property and contracts of guaranty, indemnity, or surety. A.R.S. § 25-214(C).

Division of Debts

The family law Court has broad discretion that it may properly exercise as it divides property and debts and may properly consider a number of factors including the parties’ anticipated future earnings as it attempts to equitably divide the parties’ debts. In some instances, the court may also choose not to divide certain debts, leaving the parties jointly liable. Even though the court orders one spouse to pay a community debt, both still remain liable to the creditor. The spouse who pays a debt may bring an action against the one who was ordered to pay for any amounts paid to the creditor. Wine v. Wine, 14 Ariz. App. 103, 480 P.2d 1020 (1971).

Community debts not allocated by a divorce decree remain the joint obligation of the parties. Community Guardian Bank v. Hamlin, 182 Ariz. 627, 898 P.2d 1005 (Ariz. App. 1995). However, a divorced spouse may bring a separate action for contribution from the other spouse for payment of a community debt which was not allotted in the property settlement or in the decree. Fisher v. Sommer, 160 Ariz. 530, 774 P.2d 834 (Ariz. App. 1997). Further, pursuant to A.R.S. § 25-318(P) , if a creditor secures payment from one party, but the other was ordered to pay the debt in the divorce, the harmed spouse may petition the court for an order transferring property to them and may also seek sanctions against the offending party. However those sanctions must be sought within two years after the debt should have been satisfied. A.R.S. § 25-318(P). Also, although a party may be held in contempt of court and face sanctions, the Arizona Constitution prohibits incarceration for failure to pay a community debt.

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