What is Community Property?

Property owned by a married couple is always one of two types - Marital or Separate. Generally, "Marital Property" is anything that you earned or acquired while married unless you and your spouse agreed otherwise. "Separate Property" varies from state to state, but generally includes:

• Anything that you owned before your marriage

• Gifts that were given to only you before or during your marriage

• Property that you acquired during your marriage that is in your name and that was never used for the benefit of your spouse during marriage

• Inheritances that you received before or during your marriage

• Property that you and your spouse have agreed is separate in either a Transmutation Agreement or Post-Nuptial Agreement

• Property that you acquired using assets that were solely your own and that you intended to keep separate

• Certain personal injury awards (usually the part that repays you for lost wages is marital property

In most states, these rules apply equally to traditional and Common Law Marriages.

If you are divorced or legally separated, you own 100% of your Separate Property and whatever percentage of your Marital Property was allocated to you in your Divorce/Separation agreement.

States differ in the ways that they treat Marital and Separate Property when you file bankruptcy. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin (or Alaska, where you can sign an agreement making your assets Marital), your Marital Property is considered "Community Property." In these states, you and your spouse each own half of all Marital Property. 

In all other states, called "Common Law" states, Marital Property is owned by whoever's name is on the title, deed, or other ownership documents. If both your name and your spouse's name are on the relevant document(s), you both own half of the property. If there are no such documents, generally whoever paid for the property or received it as a gift is the owner.

When you file for bankruptcy, you need to ask yourself two questions about your property:

1. What type of property is it - Marital or Separate?

2. What type of state did I acquire this property in - Community or Common Law?

The answers to these questions will allow you to determine the total value you should list for your property on your bankruptcy forms. When listing Marital Property that you acquired in a Community Property state, you will only list half of the total value. When listing Marital Property that you acquired in a Common Law State, you will list whatever percentage of the value you actually own. In both Community Property and Common Law states, you will list the full value of your Separate Property.

About the author

Jonathan Petts, Esq