Dividing Debt in a California Divorce

October 23, 2012

Dividing Debt in a California Divorce

Dissolving a marriage can be a contentious event. Spouses can have difficulties in deciding how to apportion the possessions they have acquired during the course of the marriage. What can be almost as difficult as dividing assets is dividing the debts the couple has. California is a community property state and that impacts who is responsible for paying debts. People in California considering divorce should be aware of the complexities that can arise in dividing marital debt and some things to be aware of regarding joint credit and divorce.

Who Pays Marital Debts?

According to California law, marital debts, like assets, are community property. This means that both spouses are responsible for any debts incurred during the marriage prior to the separation. It does not matter which spouse ran up the debt, nor is it important whether it was for one spouse's benefit or for the benefit of the entire family. The debt is communal even if only one spouse's name appears on bills or credit statements.

If a spouse uses separate property, such as money in an investment account established before the marriage, to pay off marital debt during the marriage, that spouse is not entitled to reimbursement for the expenditure after the spouses divorce. The law presumes that the spouse made a gift to the marital estate, sometimes called the community. This is in contrast to the rule that states that, if a spouse used separate property to acquire community property, the spouse can trace the funds and be reimbursed in the property settlement.

When a couple is trying to divide property and debts, they should split marital debt evenly, since both are equally liable for the debt. However, a couple may agree that one spouse gets a greater share of the marital assets, such as a house, but also has to take a greater share of the marital debt to offset the value of the asset.

Joint Credit in Divorce

Since both spouses are legally responsible for marital debt in California, it means that creditors may pursue either spouse for payment on the debt even if one of the spouses agrees to pay the debt as part of the divorce property settlement. If a spouse does not pay the marital debts, it can impact the other spouse's credit rating. If a spouse is concerned that the other spouse will not pay debts assigned to him or her in the divorce settlement, the spouse may want to negotiate for a higher amount of marital assets and debts to ensure both that the debts are paid and that he or she has the funds to do so.

Consult an Attorney

Dividing property and debt in a divorce can be complicated and some may feel overwhelmed at the prospect of dealing with such financial questions while going through the emotional upheaval that often accompanies divorce. Those going through divorce should seek the assistance of a seasoned divorce attorney with broad experience in handling property division who can guide them through the process.

Article provided by The Law Offices of Joel S. Seidel
Visit us at http://www.seidellaw.com/