Distress Over Community Property Law In California

[Farrel]

Our business partner (who lives in a community property state) and I put up an S-Corp (in a non-community property law state) many months before I was married in California.  soon after marriage, my business partner and I used the S-Corp to obtain a business loan and buy another company (in a non-community property law state where i stay). To get the mortgage we both needed to give a personal promise for the lender (situated in a non-community property state).
The financial institution originally request our partners to sign up the mortgage but neither one of these decided to this.  Because The company that people bought had substantial resources, the financial institution gave us the mortgage without making our partners indication and without making us promise any security.  Nevertheless, they did place a mortgage on all of the company's resources along with producing my companion and I provide individual guarantees.
The organization is just a going-concern at this time but my spouse (who lives in California) can be involved that in case my companion and I might not have the ability to pay-off your debt (ie. Move directly into bankruptcy) and in case the bank hasn't been pleased by our individual guarantees, the bank will come after her money and resources and create her apply for bankruptcy too.  The bankis legal cousel assured me upon signing the loan that until our partners pledged any belongings or explicity closed the loan record, the bank wouldn't find any recourse against them nevertheless my spouse wants more guarantee than their word. 
Our scenario is exclusive for the reason that I reside and work-in a non-community property law state (where in actuality the company was bought) while my spouse lives in a CA, a community property law state.  I'm not sure which state law controls the mortgage contract but I'm fairly sure the financial institution is based in a non-community property law state. In case of bankruptcy if the financial institution hasn't been pleased from the corporate assets or me and my companion's individual guarantees, can they pursue my spouse's money and assets (despite the fact that they mentioned they would not) and if so, what can be achieved now to avoid this?

[Daryle]

Kivi:if your spouse didn't sign these mortgage documents, then she's not legally prone to the financial institution for reimbursement. If she did get charged she'd need certainly to protect or risk a default judgment against her. Nevertheless, she must certanly be in a position to get any suit against her dismissed without an excessive amount of trouble.
Do not confuse who the bank can prosecute vs. who it can gather from if it acquires a judgment.  When The bank gets a judgment, it can domesticate the judgment and pursue community resources that are kept in California to meet that judgment whatever the fact that just one individual towards the relationship closed the mortgage ensure document. 

[Garbhan]

Our priority is in case of bankruptcy, will community property law or will typical property law control the procedure. I reside in a typical law property state where I operate the company and my spouse lives in California, a residential area property law state.  our belongings are individual ie. she purchased her home and her automobile in her name before we were married.  I've not made any money from my company so I've not made any efforts towards the "neighborhood" so to speak, I make sufficient to pay for my bills.  I am worried the lenders may take her wages.  What're the likelihood of them carrying this out? How do you guard her earnings?  Easily file for bankruptcy I'll probably file within the common-law property state as this is where I stay and this is where the company can be found.  BTW I've an SBA guaranteed loan if which makes any difference. The bottom line is: Common law state: where I reside and where the organization (that I've personally assured) can be found Neighborhood property law state (CA): where spouse (who never closed any mortgage documents) lives

[Denzell]

The laws of both states are related. The problem is what property you and your spouse have that's community property. Your curiosity about community property could be fair game to gather any judgment against you. For instance, your spouse's earnings in California (if she's any) are most likely community property and your community property curiosity about that might be susceptible to garnishment to gather a judgment against you. Hence, for every resource, you had need certainly to decide if it's community property or separate property. For that dedication, the facts of the asset, the laws of the states where you each stay, and the laws of their state where the asset is situated are important. 

[wattson48]

While I closed the mortgage I was still on my student visa.  Based On The SBA (who's ensuring this mortgage) I had been a "non resident alien".  given that they required the main customer to be always a "permanentresident" my business associate (a US person) closed on with me.  it ought to be mentioned that I was simple the whole period I was settling the loan and just got married per week prior to the closing loan documents were signed.  the financial institution realized that I was involved but were pleased with me signing being an individual and didn't create my girlfriend sign up as an ailment of the mortgage because I'd discovered a co signer.  Since signing the mortgage I've transferred towards the common-law state to be able to operate the company and we've lived apart since then.  my spouse and I maintain individual costs (she purchased the home in her name before we were married) and we just have one combined consideration as well as a couple of hundred bucks inside it. Otherwise anything else is still individual, we've been married for under annually and still live like we're solitary but we need certainly to live individually therefore I could operate the company.  She does not pay any of my expenses and I do not pay any of hers.  I did not obtain my greencard until 3-4 weeks after signing the mortgage and by that time I was in the low-community property state.  The problem is: since I live in a common law state and my wife lives in a residential area property state, easily were to seek bankruptcy relief within the common law state (since that's where I live and the company is situated), might the creditors have the ability to follow my wife?  She adamantly refused to sign this mortgage she because she needed no participation. Even today, she's simply no involvement with the company whatsoever.  the primary point that I'm discussing listed here is that we reside in different states and we don't intend to divorce. Easily were to document bk within the common-law state, may the lender (the only real debt I've may be the business mortgage using the lender - all my own debt is paid-up) follow my spouse's belongings and take her wages (she makes a six-figure revenue). When The creditors may follow her, what're our choices? Divorce, legal separation, postnup? etc.

[Jonathan]

You will find two problems here.
First, so what can the financial institution do in case that you default to the mortgage? What the financial institution may do is ruled by the mortgage files. As your partner didn't sign these papers, there's no contract between her and the bank that may make her legally prone to the bank. The financial institution can't effectively prosecute her in case that you default on the mortgage since she's not really a signatory on the loan. If it attempted, a judge could ignore this type of suit. Being A practical matter, the financial institution's lawyers realize that and wouldn't spend their time on this type of pointless exercise or get the chance to be approved for filing a friviolous regulation suit.
The 2nd problem is exactly what a family judge may choose in case that you and your partner were to divorce. Since The loan was received through your relationship and you offered a pesonal guarentee, it may be deemed a "neighborhood debt" in case you and your partner were to divorce. Nevertheless, whichever was determined in divorce court could be between you and your partner. The financial institution iwould not really a party for your breakup and can't impose any court order straight her to pay for with this debt. If she didn't recognize any divorce court order directing her to pay for on this loan, you, not the financial institution, could be accountable to getting her to court to drive conformity with all the divorce court order. The financial institution would continue steadily to follow you since that is who signed the loan papers.
I'm not stating the loan could be deemed a "neighborhood" debt. The very fact that she might not have personally gained in the mortgage makes that problem fairly dirty. But, if she's worried about the financial institution suing her and hence making her to file bankruptcy for that specific cause, thatis not likely to occur.
For the history, family court responsibilities aren't as quickly dismissed in bankruptcy as different types of debts.
Her revenue might be considered for deciding whether you (being an individual) pass the means-test for bankruptcy. If you default, the financial institution probably could prosecute you. In the event that you needed seriously to file for chapter 7 bankruptcy protection, she may or may not need to file aswell. Occasionally it's easier modify the means-test, if you equally document, so that you can move it or so that you and your partner can exempt additional group resources in the reach of creditors. The exceptions are usually more generous when both spouses document. I would add that if you're able to effectively show the BK court that it was company debt, the means-test may well not use, but the BK exceptions possibly could stay as an issue.
I'm not stating that she shouldn't get worried. But, she shouldn't get worried for that cause mentioned in your post.

[Andreas]

Anybody can sue another for just about any purpose, good or bad.
Nevertheless, if your spouse didn't sign these mortgage documents, then she's not legally prone to the financial institution for reimbursement. If she did get charged she'd need certainly to protect or risk a default judgment against her. Nevertheless, she must certanly be in a position to get any suit against her dismissed without an excessive amount of trouble.
The financial institution isn't prone to individually prosecute her since she's not about the paperwork and no judge could make her pay if she never officially decided to that responsibility within the first-place. The financial institution is available of creating money. Spending some time, energy, and money on something that the judge may likely consider as being a frivilous suit isn't something the financial institution will do, until it's extremely silly. (Not that banks can't be silly, but suing someone over a loan when that individual never closed the loan paperwork will be a "new reduced" in corporate ignorance, absent some truly strange conditions. That simply doesn't seem like your scenario.)
Treating your spouse's money and resources in the event that you filed for bankruptcy protection, can vary significantly from state to state. Nevertheless, the truth that you're committed would need to be discloseed in BK request, if you submitted. You'd be best off obtaining the response to that problem from the BK attorney who practices within the state in which you believe you may file or the state in which you're permitted file. There are several diffferences in the way a residential area property state might define the "bankruptcy house"versus the way where a common-law state might define it. The truth that this debt is mainly a company debt also could make all this dialogue concerning the means-test and bankruptcy property irrelevent. The discussion wouldn't be that prolonged. It would set you back a couple of hundred bucks to obtain a conclusive response to your question.
Quite simply, your absolute best bet would be to talk about having a BK attorney within the relevent condition, how her money and resources would be considered if you did need certainly to apply for BK safety since you and your business partner (who's not your better half) are now being prosecuted over a business debt by which you offered an individual guarentee.

[Makkapitew]

To expand about what Gemini stated, if the lenders obtain a judgment against you, before you file bankruptcy (which is just a whole different issue particularly wiht the means-test rerquiring both your earnings also if you're the main one to file)  they're able to search for community resources against which to collect.  If you file bankruptcy initial, and they don't obtain a judgment against you, they'll have nothing to make use of togo after community assets.

[lathrop]

As a matter of national regulation, the financial institution was not eligible to expect partners to sign-off on the warranty of the loan only for the heck of it; they'd need certainly to build the company or you (if it were a person loan) did not qualify for it.  
"I'm-not sure which state law controls the mortgage agreement..."another problem, but this will undoubtedly be mentioned someplace within the agreement (you are able to anticipate the record will state where in actuality the bank is situated).
"... May they pursue my spouse's money and resources (despite the fact that they mentioned they would not)..."Not effectively, no.
Only scenario I could think about that could potentially cause difficulty (apart from in case you started the ocean AND the company failed AND its belongings and your house could not protect your share of the deficit) is in a breakup scenario and a household court determined that it desired to impose on her behalf personal responsibility for what's officially "community debt of the wedding" since it was sustained throughout the marriage.  I do not observe that happening.

[Kieran]

DavidDSmith:my spouse (who lives in California) can be involved that in case my companion and I might not have the ability to pay-off your debt (ie. Move directly into bankruptcy) and in case the bank hasn't been pleased by our individual guarantees, the bank will come after her money and resources and create her apply for bankruptcy as well.
Clearly, the bank can't drive your wife to file bankruptcy (unless, as well as at-least two different lenders, the bank documents an involuntary bankruptcy for the wife, but that might be somewhat uncommon).
 
DavidDSmith:The bankis legal cousel assured me upon signing the loan that until our partners pledged any belongings or explicity closed the loan record, the bank wouldn't find any recourse against them nevertheless my spouse wants more guarantee than their word.
Requires or wishes?  either way, the financial institution does not need certainly to provide her any guarantees at all.
 
DavidDSmith:Our scenario is exclusive for the reason that I reside and work-in a non-community property law state (where in actuality the company was bought) while my spouse lives in a CA, a community property law state.
The "distinctive" dynamics of one's connection might influence the way the supreme problem performs out.
 
DavidDSmith:I'm not sure which state law controls the mortgage contract but I'm fairly sure the financial institution is based in a non-community property law state.
I'd envision the loan contract includes a selection of law provision. Nevertheless, what the law states that controls the mortgage contract has very little related to the problem about which you're concerned.
 
DavidDSmith:in case of bankruptcy if the financial institution hasn't been pleased from the corporate assets or me and my companion's individual guarantees, can they pursue my spouse's money and assets (despite the fact that they mentioned they would not) and if so, what can be achieved now to avoid this?
If both of you existed in California, all community property would be susceptible to either of one's debts.  Depending on the character of one's relationship together with your wife (i.e., why you live on opposite ends of the nation), it's certainly not obvious that any community property exists.  The lender might sue your wife, but her responsibility would be restricted to any community (or quasi-community) property.  Whether any of one's "wife's. . . Resources" are community property is difficult for all of US to know.