How Is Property Debt Divided During Divorce Proceedings?
Part of any divorce involves the division of assets as well as debts. California is a community property state. All debts acquired by either spouse throughout the marriage are divided equally, including property debt.
Obligations incurred before marriage are the responsibility of the spouse who incurred them. While this may sound straightforward, these financial matters often prove to be incredibly complex. It is essential to have the assistance of an experienced divorce attorney to manage this critical facet of divorce.
Understanding Community Property in California
When dividing debt in a divorce, the first step is to assess whether the debt is separate or community debt. Any debts you or your spouse incurred during the marriage belong to both of you, even if the credit card used was only in one spouse’s name. For example, if your spouse took the children out to buy all of their school supplies and charged them all on a credit card solely in their name, you would also be responsible for the charges on that card. Both spouses would also be responsible for one spouse’s income tax obligations if it was accrued while they were married.
In California, there are certain debts that, even if accrued during the marriage, may still be treated as separate property debt:
- Student loans are often assigned to the party who received the education unless the community substantially benefited from it before the divorce. The court may also order the recipient of the education to reimburse the community for any contributions made to their education if the community did not benefit much from it.
- Support payments, such as spousal or child support, that are still owed will also be entirely assigned to the party who owes it.
- If a spouse owes criminal fines that were incurred during the marriage, these fines would be assigned to the spouse owing the fines.
Negotiation and Settlement
If you and your spouse can cooperate, mediation may be the right path for you to work out a settlement agreement regarding debt division. Both spouses need to be transparent with one another regarding their finances. In many cases, it is advisable to liquidate as many joint assets as both parties can pay off their joint debts before finalizing their divorce.
If your relationship with your spouse is contentious, the separation of assets and liabilities may require court intervention to ensure there is a fair allocation of debts. In some cases, a spouse may be hiding assets by transferring them to a family member, offshore, or other technique. An experienced divorce lawyer can advocate on your behalf throughout the litigation process.
Protecting Your Credit Score
Remember that, regardless of the settlement agreement you have with your former spouse, creditors may not honor it. If your spouse agrees to pay a car loan and misses a payment, you may still be liable for the debt, and your credit could be affected. To prevent this from happening, you should consider doing what you can to pay off your debt before the divorce. If it is impossible for you to pay off your debts, your spouse may refinance certain debts or pay off the debt by taking out a loan in their name.
Consult an Experienced California Divorce Lawyer
If you are ending your marriage and have concerns about the division of property debts, Mattis Law, A.P.C. is here to help you navigate your case. Our San Diego legal team takes on some of the most challenging issues and is committed to providing knowledgeable and compassionate legal support.
We have the knowledge and resources to review your situation and advocate for your best interests carefully and effectively. Founding attorney Amelia Mattis was recognized as a 2022 Lawyer of the Year by the American Institute of Legal Professionals and selected as one of the TOP 40 UNDER 40 lawyers in California by the American Academy of Attorneys (AAOA).
Call (858) 328-4400 to schedule a complimentary consultation. Let’s see how we can help.