Choosing a matrimonial property regime is a decisive step in a couple's life, with implications that go far beyond the possibility of divorce. The management of debts, and in particular the repayment of loans taken out by either spouse, is directly affected by this initial choice. While most couples are governed by the community of acquests regime by default, there are contractual options that organise property relations in a radically different way. This article focuses on two specific regimes with opposing rationales, separation as to property and universal community of property, as a complement to our article on the "Community of acquests" regime. complete guide to credit repayment for couples. Understanding their particularities is essential for anticipating and managing financial risks.
The system of separation of property: compartmentalisation of assets
The system of separation of property, chosen by marriage contract, establishes total independence of property between the spouses. The principle is strict separation: there is no pool of joint property. Each spouse retains the administration, enjoyment and free disposal of his or her personal property, whether acquired before or during the marriage.
The question of proof of ownership is therefore central. Article 1538 of the Civil Code states that each spouse may prove by any means that he or she has exclusive ownership of an asset. This may be done by a title deed, invoices, but also by testimony or presumption. Where there is no proof of exclusive ownership of an asset, the law provides a simple solution: the asset is deemed to belong to both spouses in joint ownership, for half each. This presumption of joint ownership is a safety net that avoids insoluble disputes, but it can also surprise spouses who thought that one or the other was the sole owner.
As regards liabilities, the rule is just as clear. Article 1536 paragraph 2 of the Civil Code states that each spouse remains solely liable for debts incurred by him or her, whether before or during the marriage. In practical terms, if a spouse takes out consumer credit for his or her own personal needs, the creditor can in principle only pursue repayment from the spouse's own assets and income. In theory, the spouse's assets are completely protected. This is the major advantage of this system, which is particularly popular with entrepreneurs and people in high-risk professions.
There are, however, important exceptions to the principle of separation of debts. The most notable is the exception of joint and several household debts, set out in article 220 of the Civil Code. This provision of the primary regime, applicable to all married couples, establishes joint and several liability for expenses relating to the upkeep of the household and the education of children. A consumer loan taken out to finance day-to-day needs, if it involves modest sums, may therefore be binding on both spouses, even if they are separated as to property. We analyse this concept in detail in our article on with the exception of household debts under article 220 of the Civil Code. Similarly, debts incurred for the conservation or improvement of an undivided property are the responsibility of both spouses. Lastly, on dissolution of the marriage, a spouse who has repaid a personal debt owed by his or her spouse using his or her own funds will have a claim against him or her, the calculation of which may prove complex and require the assistance of a lawyer to ensure that it is fairly valued.
The regime of universal community: an extended common estate in the face of credit
In contrast to separation as to property, community of property is based on the idea of an almost total merger of assets. According to article 1526 of the Civil Code, this system pools all the property of the spouses, whether movable or immovable, present or future. This means that the property owned by each spouse before the marriage, as well as that received by gift or inheritance during the marriage, falls within the community. Only property that is "proper by nature" (clothing, work tools, claims for compensation for personal injury, etc.) is excluded, unless the marriage contract expressly includes it.
Logically, liabilities follow assets. The same article 1526 specifies that the universal community "definitively bears all the debts of the spouses, present and future". The principle is therefore one of community of debts. Whether a loan has been taken out by one or other of the spouses, before or during the marriage, it is considered to be a joint debt. In theory, therefore, the creditor can pursue payment from the entire joint estate, which constitutes virtually all of the couple's assets.
However, this community of liabilities is not absolute. It is limited by two protective mechanisms derived from the legal system and deemed imperative by case law. Firstly, article 1414 of the Civil Code protects the earnings and wages of the debtor spouse, which cannot be seized for a debt that is not joint and several. Secondly, and this is the most important point in terms of credit, case law has confirmed that article 1415 of the Civil Code also applies to the regime of universal community.
Article 1415 of the Civil Code in universal community: implications and criticisms
Article 1415 of the Civil Code is a major provision protecting joint assets. It states that when a spouse takes out a loan alone, he or she is only committing his or her own property and income. For joint assets to be committed, the express consent of the other spouse is required. The Court of Cassation has consistently ruled that this rule is a matter of public policy and therefore applies even to spouses married under the universal community property regime.
The consequences of this application are paradoxical and often severe for the creditor. In a universal community, the borrowing spouse's own assets are, by definition, extremely small, if not non-existent. If a spouse takes out a loan on his or her own, without the agreement of his or her spouse, the creditor's pledge is limited to a virtually empty estate. The bank or credit institution then finds itself in a situation where its guarantee is illusory. Academic writers have widely criticised this solution, highlighting its unfairness and the trap it represents for creditors who might legitimately think that the entire joint estate is pledged. This strict application has much harsher consequences than under the legal regime, as we analyse in our article dedicated to the application of article 1415 in the legal community.
In the face of this criticism, a recent development in case law has tempered this rigour. In a ruling handed down on 5 December 2018, the Court of Cassation held that where there is a clause allocating the entire community estate to the surviving spouse (which is common under this regime), the surviving spouse, who receives the entire estate on the death of his or her spouse, is then liable for all debts, including those arising from a loan taken out by the deceased without his or her consent. Based on article 1524 of the Civil Code, this decision rebalances the situation in favour of the creditor, but only on the death of the borrowing spouse. During the marriage, the principle of protection of joint property under article 1415 remains.
At the stage of contribution to the debt, i.e. the question of who should bear the final burden of the debt between the spouses, the principle of universal community reigns. The debt is definitively borne by the community, unless it is proven that it was contracted in the exclusive personal interest of one of the spouses.
The complexity of the interactions between different matrimonial property regimes and credit law rules means that an informed choice is essential. For an analysis of your situation and thelegal expertise required optimising your matrimonial property regime to meet your financial commitments, contact our firm.
Sources
- Civil Code (in particular articles 220, 1415, 1526, 1536 to 1538)
- Consumer Code
- Court of Cassation case law (in particular Civ. 1re, 3 May 2000, no. 97-21.592; Civ. 1re, 5 October 2016, no. 15-24.616; Civ. 1re, 5 December 2018, no. 16-13.323)
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