When a judgment creditor obtains a judgment in another state against a married person, the judgment can be domesticated in Arizona, and if executed correctly, the domesticated judgment can enforced in Arizona against both spouses. One of the issues that can arise in Arizona judgment domestications occurs when the judgment was based on a guaranty that was only signed by one spouse.
Arizona is a community property state. In Arizona, either spouse may contract debts or otherwise act for the benefit of the community, and the debt created by the spouse is going to be both an individual debt for the spouse that incurred it, and a community debt. When the debt is deemed a community debt, community assets can be attached by the creditor to satisfy the debt.
However, if the debt is a separate debt of the spouse incurring the debt, then community property cannot be used to satisfy the debt. Judgment creditors who want to domesticate a foreign judgment in Arizona need to know the nature of the judgment to determine if the debt is a separate debt or a community debt.
A.R.S. § 25-214(C)(2) states that when the instrument is a guaranty, the community will be bound only upon the signature of both spouses. So if only one spouse signs the guaranty, then the spouse signing the guaranty is liable to repay the obligation, but, the community is not bound to repay the debt. This law differs from most states, which do not require both spouses to sign a guaranty. So what if the guaranty was signed outside of Arizona, before the couple moved to Arizona, and a judgment was entered in another state? If both spouses did not sign the guaranty, and the judgment is domesticated in Arizona, then there will not be community liability.
The Arizona Court of Appeals has analyzed whether A.R.S. § 25-214(C)(2) is procedural or substantive in nature. The Appellate Court determined the legislature clearly intended that A.R.S. § 25-214(C)(2) protects the substantive rights of the non-signing spouse. The substantive law creates and defines rights that bars collection of the guaranteed debt from community property when only one spouse signs the guaranty. Under Arizona law, the community is liable for what would have been a community obligation had it been incurred in Arizona. So, it is critical to analyze the nature of the debt to determine if it can be enforced in Arizona against community property. A.R.S. § 25-214(C)(2) states both spouses must execute a guaranty to bind the marital community.
Even if the judgment is only enforceable against one spouse’s separate property, it often makes sense to domesticate the judgment in Arizona. Experienced judgment domestication attorneys will be familiar with this common trap, and will know what steps to take to give you the best chance at collection. If you need a judgment domesticated in Arizona, or are facing a creditor domesticating a foreign judgment against you, you should hire a knowledgeable attorney with experience dealing with these issues.
The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.