When we buy a house, the deed is recorded with the County Recorder. There is a public record of who the owner of the property is. If someone is injured on the property, it is relatively easy to find out who the responsible party is. If a judgment is obtained against someone, the judgment is part of a public court record. To put others on notice that the judgment exists, and to create a lien against an asset so that the judgment can be enforced, an “Abstract of Judgment” is often recorded with the County Recorder. This document acts as a lien and puts other creditors on notice that the judgment exists and has priority in payment when the property is sold as against other liens or judgments that may have been created afterward. In addition, potential creditors are made aware of the existence of the judgment just as they are made aware of any existing mortgages. If a creditor decides to extend credit, that creditor knows that they won’t get paid until after the liens previously recorded are paid off.
Most people, upon completing a prenuptial agreement or a post-nuptial agreement, keep that document private. There are good reasons for doing so, especially since any valid document of this nature has lots of information included in it about assets and liabilities, and most of the time people wish to keep this information private. These agreements often dictate the responsibility for certain obligations as between the spouses providing that one spouse will “hold the other harmless and indemnify the other” from a liabilities. Take for example, the speculative real estate developer or gambler who wants to be able to pursue their interest, while the other spouse does not want to be responsible for any debts or judgments resulting from those activities.
These provisions, however, do not necessarily keep the “protected spouse” safe. The problem is that California law presumes that liabilities incurred by someone during marriage are community property and either spouse can be held liable. A creditor who does not know about a prenuptial agreement can pursue either spouse. It is then up to the spouse who was not responsible for the debt to pursue the other spouse for indemnification.
The only way to avoid this situation is to record the prenuptial agreement so that a potential creditor is put on notice that the debt is the responsibility of only one spouse. By making it public record that there is no community property, or that there will be no community debts, it is not reasonable for a creditor to rely on community property rules. Anyone contemplating a prenuptial or postnuptial agreement should discuss this issue with counsel.