Community Property awarded to you in a marital settlement agreement is not subject to your Ex-Husband’s Third Party Creditors.
Recently, a California High Court ruled that Community property that was awarded to a wife in a marital dissolution judgment was transmutated to her separate property and was not subject to charging liens by a third party creditor who had a judgment against her former husband.
The couple in this situation filed for divorce in December 2010. Then, the couple agreed to and signed a martial settlement agreement in January 2011. The agreement divided up the couple's community property to each spouse. Part of the division of assets was that the husband was taking sole ownership for a judgment on a debt of $523,979.28.
Immediately after the couple executed their marital settlement agreement the holder of the debt tried to collect against the community property that had already been divided up in the agreement. The collections company argued that the wife was on the hook for her soon to be ex husband’s debt. And, they argued, the division of community property did not have any bearing on their ability to collect from wife’s property because the divorce was not yet finalized. Therefore, the creditor argued, the property could not be her separate property until the divorce was final in the courts.
The Court of Appeals disagreed stating that a divorcing couple can agree to separate their community property at anytime during a divorce. Furthermore, such an agreement does not need to first be approved by the Court before becoming binding on the spouses or any third party.
Due to the executed marital settlement agreement that took place right before the creditor tried to collect, wife’s portion of the community property had been transmuted to her own separate property and was safe from husband’s creditors.
Contact our office if you are going through or contemplating divorce and are worried about your husband’s creditors attacking your assets. The Law Offices of Paul H. Nathan represent women in divorce, custody and separation matter in San Francisco, Marin County and throughout Northern California.