Full question:
My finance foreclosed on his home in California about 3 years ago. We are getting married soon. My concern is his debt will be my debt. I understand the bank can report the 'forgiven' amount to the IRS and he can be taxed on the forgiven amount. I have a considerable amount of equity in my house (only in my name). Is there ANY chance the bank or IRS come after my house or equity? Or can they come after me for the taxes owed?
- Category: Debts and Credit
- Date:
- State: California
Answer:
While anything is possible, it is unlikely that creditors could successfully claim your separate assets for your fiancé's debt incurred before your marriage. In California, which is a community property state, property owned solely by you before marriage is considered separate property.
If you did not use your separate property to secure your fiancé's debt, nor co-signed or guaranteed it, your assets should generally be protected. However, if you have joint property or accounts, creditors may pursue those to recover debts. For example, if you hold joint accounts, funds may be subject to claims for your fiancé's debt.
Regarding tax liabilities, if your fiancé is taxed on forgiven debt, you typically would not be liable for those taxes unless you filed jointly and benefited from the tax return. The IRS has provisions for innocent spouses, which may relieve you from liability if certain conditions are met (see IRS Form 8857).
In summary, your separate property is likely safe from your fiancé's debts, but joint assets could be at risk.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.