Creditor and Debtor Windfalls from Divorce
![handle is hein.journals/epcplj3 and id is 215 raw text is: CREDITOR AND DEBTOR WINDFALLS FROM
DIVORCE
by James R. Ratner*
I. INTRODUCTION ...........................................211
II. CREDITOR WINDFALLS FROM DIVORCE. ................. .....214
III. A SIMPLE SOLUTION: USE TRACING RULES TO RENDER DIVORCE
A NON-EVENT FOR CREDITORS .................................... 223
IV. DUELING WINDFALLS: SOLUTIONS TO AVOID .................229
A. Increased Incentives to Divorce ............................. 232
B. Overemphasis on Debt Allocation at Divorce ........ ....... 235
V. CONCLUSION .......................................... 238
Question: What is worse than assuming financial responsibility for
your spouse's debts while you are married?
Answer: Being forced to assume even greater financial responsibility
for those debts after you divorce.
This brief article addresses the question and proposes a solution to at
least minimize the answer.
I. INTRODUCTION
Debt is hard, and marital debt can be even harder, as assets generated
by one spouse during a marriage are often available to satisfy obligations
incurred by the other spouse.' One relatively ancient form of protection
offered to the non-debtor spouse, however, is the concept of separate
property.2 Separate property of a non-debtor spouse is, during a marriage,
* Professor of Law, University of Arizona James E. Rogers College of Law. I thank Professor
Barbara Atwood for her suggestions concerning this article as well as for suffering through endless
conversations with me about marital property topics for the last twenty years, and Andrew Reeves for
his research and gentle nagging.
1. In Community Property jurisdictions, including Washington, Idaho, Nevada, California,
Arizona, New Mexico, Texas, and Louisiana, assets generated by the productive efforts of each spouse
during the marriage are generally community property, and community assets are generally available to
satisfy community obligations incurred by either spouse. WILLIAM A. REPPY JR. & CYNTHIA A.
SAMUEL, COMMUNITY PROPERTY IN THE UNITED STATES, 313-14, 327 (7th ed. Aspen Publishers 2009).
2. The concept of separate property is entrenched in all community property jurisdictions. See
Grace Blumberg, COMMUNITY PROPERTY IN CALIFORNIA 6 (5th ed., Aspen Publisher 2007); James
Ratner, But From Where Will the Money Come? Community Property Liability for Child Support and
Other Premarital Obligations, 9 WHIT. J. CHILD AND FAM. AD. 17, 23-24 (2009) [hereinafter Ratner,
But From Where Will the Money Come?]. The concept of separate property is also generally applicable
in common law jurisdictions, including those jurisdictions that give divorce judges the ability to allocate
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Creditor and Debtor Windfalls from Divorce
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