Should you file bankruptcy before you get married? Many people have asked me this question, and the answer is a definite “yes!” If you get married, your debts “come into the marriage” in California. Specifically, a creditor may go after community property for the debt of either spouse. Let’s break down what this means.
California is a community property state. This means that once you get married, everything you earn or acquire, with exceptions like inheritances and gifts, belongs to both of you equally. The only way around this is a written agreement signed by both of you, usually called a prenuptial or postnuptial agreement. Everything you owned before you get married, and everything you buy with money you had before you get married, is your “separate property” and your spouse has no legal right to it. This discussion assumes that there is no prenuptial or postnuptial agreement waving California’s community property laws.
Money and property acquired after marriage belongs to both spouses and is called “community property.” Your wages and other earnings, investments, vehicles, house, and everything else that either or both of you get after marriage are all community property, except for property that is purchased from the separate property funds of one of the spouses, in which case it would be that spouse’s separate property.
When you are married, your creditors may go after your separate funds and property, and the community property that belongs to both of you. For example, let’s say that Wells Fargo sued Ed and got a judgment against him for $20,000 that was overdue on his Wells Fargo credit card. After the judgment, Ann marries Ed. Now that Ann and Ed are married, Wells Fargo could use its judgment against Ed to garnish both Ed’s and Ann’s wages, because Ann’s wages are now community property. Wells Fargo could also take money out of Ann’s and Ed’s joint bank account, because that money is also community property.
In order to avoid this situation, Ed should have filed bankruptcy before he and Ann got married. It is obviously better for the other spouse and for the marriage that neither spouse brings substantial debt into the marriage in order for the couple’s community property to not be in danger of being taken by creditors.
Keeping old debts out of a marriage is a good way to show your soon-to-be spouse that you care enough about them to protect them from your creditors. And of course bankruptcy will also get rid of (discharge) your debts and give you a financial fresh start.
If you have substantial debts that you cannot pay and are thinking of getting married, contact a bankruptcy attorney today.