The division of debt in a California divorce can be complicated. Issues in division include characterizing the debt as marital or separate, deciding whether one spouse is entitled to reimbursement for payment of debt, and dividing debt equally in accordance with California’s community property laws. If a couple incurs debt jointly, but one spouse is assigned that particular debt in the divorce, there may be concerns about the other spouse's liability in the event the spouse who was assigned the debt files bankruptcy. The advice of an experienced California family law attorney is can be invaluable if there is significant debt to be divided.
Because only marital, or community, debt is subject to division in a California divorce, the first issue to address is whether a particular debt is community or separate.
As a general rule, community debts are incurred after the date of marriage, but before the date of separation (or marital cut-off date). Even if only one party incurred the debt, community debts are considered to belong equally to both parties (just as community property belongs to both parties regardless of who earned it). Separate debts are those incurred before the marriage date, or after the marital cut-off date. As the name implies, they are the sole responsibility of the person who incurred them.
Sometimes, identifying whether a debt is community or separate is a straightforward exercise. Other times, however, the analysis is less clear, particularly if the date of separation is in dispute. California courts use a two-pronged test to identify whether a couple is truly separated for the purposes of establishing a marital cut-off date. The first prong of the test is whether the couple is physically separated. This often means living in separate homes, but may just mean sleeping separately within the same dwelling. The second prong is whether at least one spouse intended that the separation was a permanent break in the marriage.
Community debt is not merely the opposite of community property. Community property is owned jointly by the spouses. However, community debt often involves a third party: the creditor. A separation agreement or divorce decree in which one spouse is made responsible for a debt incurred during the marriage is binding on the parties to the divorce. It does not, however, bind a creditor with whom both spouses co-signed for a loan. The creditor may pursue both former spouses for repayment. If division of debt in a California divorce is not carefully addressed, one spouse could end up with liability and a ruined credit score due to debt the other spouse should have paid.
Other complications in the division of community debt include situations in which one party is paying the mortgage on the marital home with his or her separate property or earnings after separation (but before divorce), but is not getting any benefit from the home because they have moved. In some cases, reimbursement to that party may be possible and require calculation.
Shaffer & Associates has handled hundreds of California divorces in San Diego and the surrounding area. We have extensive experience with the division of community debt in divorce, and with factors that can complicate the division of debt. We are skilled negotiators, and always attempt to conserve client resources by crafting a mutually acceptable settlement of debt issues. Where settlement is not possible, or not in our clients' best interests, however, we have the legal knowledge and courtroom experience necessary to protect our clients' interests at trial.
The San Diego family law attorneys of Shaffer & Associates serve San Diego County and the surrounding communities, including Orange County, Riverside County and Los Angeles County. Contact Shaffer & Associates online or call (619) 230-1030 today to consult with us about the division of community debt in your divorce.