Legal Question in Real Estate Law in Arizona

Re: Liability for spouse short selling her own house?

This is a complicated question. You and your wife should see an attorney before she does the short sale. In addition to the issues you bring up in your question, there is also the issue of taxes that may be due because of the short sale.

Here�s basically how it works. Property (and debts) acquired before marriage is separate property (or a separate debt). Property (or debt) acquired during the marriage is community property (or community debt).

With that in mind, see A.R.S. 25-215:

A. The separate property of a spouse shall not be liable for the separate debts or obligations of the other spouse, absent agreement of the property owner to the contrary.

B. The community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse's contribution to the community property which would have been such spouse's separate property if single.

C. The community property is liable for a spouse's debts incurred outside of this state during the marriage which would have been community debts if incurred in this state.

D. Except as prohibited in section 25-214, either spouse may contract debts and otherwise act for the benefit of the community. In an action on such a debt or obligation the spouses shall be sued jointly and the debt or obligation shall be satisfied: first, from the community property, and second, from the separate property of the spouse contracting the debt or obligation.