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#17992 - 05/16/02 08:36 PM
TX Privacy vs. Community Property state
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Joined: Oct 2001
Posts: 120
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Help! We have some conflicting opinions between our compliance and legal departments. Actually the problem may be with two conflicting laws (imagine that). Here is the situation. Mary Public has a loan in her name, based solely on her individual income and credit rating, here at the bank. No cosigner, etc. Therefore the bank can't disclose any information to hubby about this loan. No problem. Now Mary and hubby are getting a divorce. Since Texas is a community property state, our legal department says hubby is still responsible for the note even though he doesn't even know the loan exists. From a privacy standpoint, the bank still can't give him any information on the loan, yet we can go after him to collect it? How does that work? Confused....please help.
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#17993 - 05/16/02 09:01 PM
Re: TX Privacy vs. Community Property state
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Power Poster
Joined: Jun 2001
Posts: 6,153
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Darn right you can go against him--the heck with privacy if she defaults. However, she will likely be primarily responsible on the debt, i.e., the court will give the debt to her, but that does not relieve him of the debt incurred during the marriage. If she does "get" the debt in the divorce, but has not assets to pay--forcing you to go against him--he then can go against her for what he had to pay.
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#17995 - 05/17/02 02:05 PM
Re: TX Privacy vs. Community Property state
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Posts: 120
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Thanks guys. I knew there would be a reasonable explanation out there somewhere.
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#17996 - 06/28/02 03:47 PM
Re: TX Privacy vs. Community Property state
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Galveston, TX
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As a person who recently was married and lives in Texas and who also did a lot of research prior to entering into a prenuptual agreement, I would tend to argue the fact that you can automatically go after the husband on this loan based solely on community property laws. The presumption of community property is rebuttable by proof that the lender agreed to look only to the separate property of the contracting spouse. There are a number of Texas court cases offering support to this stance. Future earnings of a spouse are also considered separate property and without the spouse's signature on the loan - you may not be automatically entitled to go after future earnings (garnishment/attachment). I would hesitate to move forward on a situation like this without a little more research. The old blanket statements regarding community property are continually being tested and may not be as cut and dry as one might think.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#17997 - 06/28/02 06:24 PM
Re: TX Privacy vs. Community Property state
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Caution is always advised and I believe the cause has to be worth the cost. The above may be referring to the Cockerham vs Cockerham case which did allow liability of an unsigned spouse on the the other, as I recall. zaibatsu could discuss this much better than I as I know the thrust, she/he likely knows all the twists and turns.
The bottom line would be not to rule out the possibility of a spousal liability when in need.
Basic info and references are at http://www.trustsandestates.net/Nutshell-Public/CPNutshell/IceCPNutshell.htm
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#17998 - 06/28/02 08:50 PM
Re: TX Privacy vs. Community Property state
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Joined: Jun 2002
Posts: 80
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Texas Family Law Section 5.61 (which has been moved, but I don't have time to find the current citation), is entitled "Rules of Marital Property Liability" and which provides:
"(a) A spouse's separate property is not subject to liabilities of the other spouse unless both spouses are liable by other rules of law.
"(b) Unless both spouses are liable by other rules of law, the community property subject to a spouse's sole management, control, and disposition is not subject to:
"(1) any liabilities that the other spouse incurred before marriage; or
"(2) any non-tortious liabilities that the other spouse incurs during marriage.
"(c) The community property subject to a spouse's sole or joint management, control, and disposition is subject to the liabilities incurred by him or her before or during marriage.
"(d) All the community property is subject to tortious liability of either spouse incurred during marriage."
In Cockerham v. Cockerham, the court held that debts of a dress shop the wife operated were joint liabilities of both the husband and the wife. Since they were joint liabilities and not liabilities of the "other spouse," Section 5.61(a) did not insulate the husband's separate property from liability for these debts. A joint liability is an obligation of both parties; the husband's separate property was therefore subject to the dress shop debts.
If that is as clear as mud, contact your attorney before proceeding. Generally, you can go against both spouses and I would until they prove otherwise. As you can see, the exceptions are narrow. Have fun.
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#17999 - 06/28/02 08:52 PM
Re: TX Privacy vs. Community Property state
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Joined: Jun 2001
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I can't believe I am saying this, but I agree with the Moose.
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#18000 - 07/01/02 03:12 PM
Re: TX Privacy vs. Community Property state
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Galveston, TX
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OK - I'll bite one more time. I would refer back to the situation in the original post and the original response that said basically that the spouse is unequivocally responsible for the note. As I am not an attorney, I will defer to one's opinion:
Professor Joseph W. McKnight suggests:
The phrase "community debt" has long been useful in characterizing borrowed money or property that a spouse buys on credit. If the lender or seller does not specifically look to the borrower's or buyer's separate property for payment, it is clear that a community debt has been incurred, and thus that the money borrowed or property bought is community property. But to take the phase out of this context, as well as to say that the designation of such a debt as "community" makes both spouses liable for it (when only one of them has contracted it), is clearly contrary to the express terms of Section 5.61. [Tex. Fam. Code Ann.] Under Texas law as amended and recodified in 1969, a community debt means nothing more than that some community property is liable for its satisfaction. A community debt may at the same time be a separate debt, unless the creditor agrees to seek satisfaction from community property only. Hence when the creditor has not agreed to limit recovery from one marital estate or the other, he may proceed against either for satisfaction. Confining the term community debt to its traditional characterization context would remove a great source of confusion and discourage the tendency of some courts to find separate debts where a section 5.61 community debt was clearly intended by the parties concerned.
McKnight, Annual Survey of Texas Family Law, 37 Sw.L.J. 65 at 77 (1983).
While I'm not saying the spouse has no liability, I am encouraging that you go into a situation with your eyes wide open. Based on the limit circumstances discribed in the original post it may not be a cut and dry situation. Additionally, unless the loan went past due and you were going to actually pursue the spouse for payment, I would be very careful regarding breaching the privacy of the original spouse by disclosing the loan to the spouse that has not signed on the account.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#18001 - 07/01/02 03:30 PM
Re: TX Privacy vs. Community Property state
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Joined: Jun 2001
Posts: 6,153
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Where do you find this right of privacy that you keep referring to. How do you think that you are going to determine if the other spouse has liability without letting him/her know about the loan? I guess you could just sue them without first investigating their responsibility--there is no privacy breach there.
I think you are taking much too conservative of an approach. If you have a husband and wife and you determine that you need to collect against the non-contracting spouse, I do not think privacy is a concern. Do you have a court case (preferably Texas Supreme Court) that says otherwise?
If you are so worried about privacy, then sue the contracting spouse and then take the other spouse's deposition with a request for production. That spouse will be a witness (with provided documents) and there is no expectation of privacy in the litigation (though I think it is a miniscule consideration outside of the litigation). Your deposition may find that the spouse has liability. Thanks.
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Better a patient man than a warrior, a man who controls his temper than one who takes a city
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