Limitation on Liability for Non-Working Spouse’s Premarital Debt

BattleThe Arizona Court of appeals issued its opinion in SQPR Venture, Inc. v. Robertson addressing the issue of whether a non-debtor spouse’s income can be used to satisfy a separate pre-existing debt of the debtor spouse (“Judgment Debtor”) when the Judgment Debtor provides non-financial support to the family as a stay at home spouse and parent.

The underlying facts are that the Judgment Debtor had a default judgment entered against her in 2003. The Judgment was timely renewed. Years later, after she re-married, the judgment creditor, filed an earnings garnishment against the community property. The non-debtor spouse provided all of the income while the debtor was a full-time stay at home mother. The Judgment Creditor argued that the Judgment Debtor’s non-financial contribution to community property was a quantifiable value that should open the non-debtor’s community income to garnishment.

Arizona law provides “[t]he community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse’s contribution to community property which would have been such spouse’s separate property if single” A.R.S. § 25-215(B).

The Judgment Creditor also argued that the transfer of the non-debtor spouse’s income into the Judgment Debtor’s account of funds that fell just short of the threshold for garnishment was a fraudulent transfer under the UFTA. The Judgment Creditor argued for a UFTA violation if the court found that the non-debtor spouse’s community property was liable on the judgment. The flaw with the Judgment Creditor’s argument is that the Judgment Debtor was not making any transfers. Rather, the non-debtor spouse transferred funds to the Judgment Debtor. The Judgment Creditor’s arguments did not satisfy UFTA.

The court of appeals court held that the trial court correctly found that the income of the non-debtor spouse was protected against liability for the Judgment Debtor’s premarital debt, when the Judgment Debtor provides a non-financial service to the family that has value and for which the community would otherwise have to pay. The court affirmed the trial court’s finding that the non-debtor spouse’s property was immune from garnishment since the Judgment Debtor was not making a financial contribution to the marital community.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

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