It frequently happens that once creditors begin actively pursing a debtor, that debtor will attempt to hide his assets to keep them out of the reach of the creditors. Usually one of the first things a debtor will do, is move his cash to a bank account in his spouse’s name. He does this believing that his money is now safe from creditors and that creditors cannot touch those funds since they are not in his name.
What is even more unfortunate about this scenario, is that many creditors and their attorneys are under this same mistaken belief. THIS IS ABSOLUTELY INCORRECT!!!!!!!
California is a state that is extremely creditor friendly. Our laws are designed to actually help creditors as much as possible. This is not the case in other states.
For example, in Texas, when a creditor serves a bank levy on the debtor’s bank, the bank actually calls the debtor to notify him of the levy and to give him an opportunity to pull his money out of the bank. This makes the bank levy completely ineffective.
In California, there are numerous code sections designed to aid the creditor in levying on bank accounts which may have commingled funds in them. This article will explore some of the specific code sections which allow creditors to do this.
The first code section, Code of Civil Procedure, Section 700.160, states that a creditor can levy upon a deposit account that stands in the name of the judgment debtor’s spouse, whether alone or together with other third persons.
This means that even if the debtor and his spouse maintain separate accounts, and each account is listed in their separate names, the sheriff will levy on the account of the spouse as long as the creditor seeking to levy on the funds provides an affidavit to the bank that the account holder is the true spouse of the debtor.
This is truly a gift from the California legislature. The reason why California is so liberal on this issue, is because of the State’s community property laws. In California, the monies earned by both spouses during marriage is considered “community property” and thus equally the property of both spouses.
Civil Code Section, 5120.110(a) takes this whole proposition further. It states that it is not even necessary to name the nondebtor spouse as a defendant in the action to enforce a judgment against the community property.
This code section makes it virtually impossible for the debtor to shield his assets by transferring them into his spouses name.
Many debtors attempt to get around this code section by alleging that the bank account of his spouse does not contain community property monies but rather only separate property. If in fact the monies in that account are the spouses separate property, then the debtor is correct that the creditor is not entitled to those funds. However, the burden of proof rests with the debtor to prove the separate property status of those funds. This generally requires a great deal of work to prove and most of the time, the debtor is unable to meet this burden of proof.
Very few creditors or collection attorneys realize that a creditor can also garnish the wages of a debtor’s spouse.
Civil Code Section, 5120.110(b) states in pertinent part that both spouse’s earnings during marriage are community property and therefore, the nondebtor-spouse’s earnings are liable for a debt incurred during marriage. However, since this is such a far reaching tactic for a creditor, the court requires an order to be obtained by them before the garnishment can be carried out.
Another very common defense that debtors and their spouses will raise in attempting to fight asset levies, is that since they obtained a formal division of property through their divorce, the creditor is now bound to honor that property division. An example of this would be where the wife was assigned the car in the divorce, and the creditor pursues both the husband and the wife for default on the car loan.
Civil Code Section, 5120.160(a)(1) states that the rights of a creditor against the property of the debtor spouse-both separate and community property received in the division-are not affected by a judgment assigning the debt to the other spouse for payment pursuant to a property division.
In conclusion, since the laws of California allow a creditor to actively pursue the funds of a debtor’s spouse, you should take advantage of this. What are you waiting for–go for it!!!!