Division Of Debts In A California Divorce

division of debts

We all know divorce means splitting our properties and assets, but often forget that debt is included in that separation. Assets you wish to keep are one thing, but fairly dividing debts is also another factor when pursuing a divorce. California is a community property state, meaning the community is liable for the debts that have accumulated throughout the marriage.

Determining the character of debt, whether either spouse is entitled to reimbursement, or how to make the division completely equal is not always straightforward or easy. It’s advised to seek consultation from an experienced family law attorney to help you ensure you do not pay debts you did not incur.

Dividing Marital Property and Debts in California

California is a community property state, meaning generally, assets acquired and debts incurred by either spouse during their marriage belong to both spouses equally. Unless both spouses have entered their own agreements to the division of their property and debts (either through prenuptial or postnuptial agreements), a court will order a judge to divide their community property and debts equally. The court may not divide each asset and debt in half, the ending goal is to split with equal division.

There is an exception to this rule, when the value of the community debts exceeds the value of the community assets. If this is the case, the law allows courts to order an unequal division of the debts by assigning the excess debt to the spouse in a better financial situation.

Unlike marital property being divided equally, debt is not always divided in the same way, and it is the responsibility of each party to pay off the debts assigned to them under their divorce settlement terms. If one spouse fails to pay off an assigned debt, creditors can potentially pursue them over the overdue payments. 

If creditors contact you to pay off a debt that has been assigned to your ex spouse, you may file a motion with the court to have the divorce settlement enforced. It is possible for creditors to still pursue you for the debt if your former spouse has declared bankruptcy, and if this is the case you should hire an attorney experienced in handling these types of cases.

Community Debt vs. Separate Debt

Community debt are debts that are induced after the date of marriage, but before their date of separation. Debt that incurred during the marriage belongs to both of the spouses equally, even if only one spouse caused the debt.

Separate debt is debt that occurred prior to getting married, or after the separation of spouses. These separate debts only belong to the spouse that incurred them.

Date of Separation

A judge will typically consider debts incurred after a couple separates as separate, and assign the debts to the spouse that incurred the debt post-separation. Unfortunately, it is not always easy to determine the date of separation. Courts occasionally will hold a trial just to determine the date of separation before a judge is able to move forward.

Under California law, there is a two-part test when establishing an official separation date:

  1. There must be a physical separation between the two spouses. Physical separation is determined when one spouse moves from their shared home. The courts may also find physical separation occurred when the spouses have started sleeping apart in separate areas of the same home.
  2. In addition to physical separation, one spouse must have had intent to end the marriage.

Dividing the Family Home

Dividing the mortgage and the family home proves to be difficult, as even the most straightforward cases involve a couple buying their home together and only using community funds for the purchase and payments.

When divorcing, the couple will be equally responsible for the mortgage on their home. A court may order the couple to sell the home to a third-party, and then divide the sale proceeds equally between both spouses. In another instance, the court may order one spouse to buy out the other, and refinance the mortgage so only one spouse is responsible for future mortgage payments, taking the other spouse off the mortgage.

Each case is different and can be complicated, and speaking with a divorce attorney who understands the in-depth laws regarding post-separation mortgage payments and reimbursements will ensure you receive a fair and equal share when splitting your family home.

Legal Separation Guidance with a California Divorce Attorney

At Hann Law Firm, we are an advocate for you in the face of challenges when navigating through difficult legal issues, like debt division.

We know your case is important to you, and we take it just as personally. Your case matters to us, and we’re here to help you see through it every step of the way. We are here to fight for you, ensuring you are set up for a successful and happy new chapter after your divorce.

Contact us for a free consultation with a knowledgeable member of our team.