September 15, 2019

Oregon’s Family Expense Statute, Separate Property State & Bankruptcy

Oregon is a separate property state surrounded by community property states (Washington, Idaho, Nevada and California).  There is, however, an exception to the separate property concept with Oregon’s “Family Expense Statute.”  This article details the Family Expense Statute in the context of a separate property state and also discusses how bankruptcy interacts with this statute. But first, a few definitions are in order.

Separate Property State (Oregon)

A separate property state, which Oregon is,  simply means that your property is your property, and your spouse’s property is your spouse’s property.  If your name is on the car or the house, but your wife’s name is not, you own the house or the car and not your wife (although your wife may claim an equitable interest in the property, in some instances).  This applies generally to debt as well; if your name is on the credit card and your wife’s name is not, you are liable for the credit card, not your wife.

Community Property State (California, Nevada, Idaho, Washington, etc.)

In a community proper state, such as California, a husband and wife own property, equally, obtained during the marriage, despite only one spouse’s name being attached to the property.  For example, a married couple in California: if the husband purchases a house without the wife’s name during the marriage, the wife will be considered owner of the house, as well. Income and debts, in a community property state, are owned by the other spouse as well.  Therefore, if the wife has a bank account with wages in it but without the husband’s name on the account, the husband also owns the wages in the account (in a community property state).  Additionally, in a community property state, if the husband takes out a credit card during the marriage in his name only, this debt becomes the wife’s debt as well.    Oregon is a separate property state; therefore the rules of community property do not apply.

Oregon: A Separate Property State

Since Oregon is a separate property state, debts incurred during the marriage by one spouse is not the other spouse’s responsibility, with the exception of the Family Expense Statute.  Also, property acquired by one spouse in Oregon is not the other spouse’s property, unless the other spouse’s name appears on title (the other spouse may have an equitable interest in the property, nonetheless, if the other spouse’s resources went to obtaining that property).

Oregon’s Family Expense Statute

Therefore, the general rule is: debts incurred by husband are husband’s debts in Oregon, not wife’s; and, debts incurred in Oregon by wife are wife’s debts not husband’s.  This concept, however, is turned on its head with Oregon’s Family Expense Statute (ORS Sect. 108.040), which states: “The expenses of the family and the education of the minor children are chargeable upon the property of both husband and wife, or either of them, and in relation thereto they may be sued jointly or separately.”  This statute usually comes up with medical debt.  For example, if a husband incurs medical debt only in his name, the provider of the medical service can ultimately pursue the husband and wife for this bill.  Often, when the medical provider is seeking a judgment in such a case, the medical provider will sue both the husband and the wife, despite the fact that only the husband incurred the debt.  With a judgment in hand, the medical provider can garnish both the husband’s and the wife’s wages and bank accounts.

Oregon’s Family Expense Statute & Bankruptcy

What are the ramifications of the Family Expense Statute and bankruptcy?  Often, if I have a client who has incurred substantial medical debt, and whose wife is relatively debt free, I will have a discussion about Oregon’s Family Expense Statute, and how the wife may be liable for the husband’s medical debt.  I discuss the possibility of including the wife in the bankruptcy filing, and thereby filing a joint bankruptcy.  Since I generally do not charge more for a joint bankruptcy (husband and wife) than an individual bankruptcy, the other spouse may easily join the bankruptcy.  If one spouse files bankruptcy first, and then the other spouse is later sued by the medical provider under Oregon’s Family Expenses Statute, a second bankruptcy may need to be filed.  In many cases, then, it makes sense to file a joint bankruptcy (husband and wife) rather than potentially two bankruptcies.

If you have questions about bankruptcy and how Oregon’s Family Expense Statute may apply to your situation, please contact me today for your free in-office bankruptcy consultation in Eugene.

 

 

 

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

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