How Do Courts in California Divide Debt in a Divorce?
Marital debt can cause major tensions during a divorce. In many cases, the first questions our clients ask have to do with dividing property and debt.
The Orange County property division attorneys of Pedrick Law Group, APC, can guide you through the complexities of asset protection and division. We believe in taking a proactive approach to your divorce or legal separation. Our talented legal team can help you through this difficult time and help you set up your new life with your financial health in mind.
Call and schedule a consultation today by clicking here or calling (818) 276-9051.
What Does Marital Debt Look Like in California?
Evaluating debt in a divorce is a complex process that deserves the attention of a financially savvy property division lawyer. Marital debt can add up over the course of a marriage and usually consists of:
- Credit card debt
- Personal loans
- Auto Loan Debt
- Medical Debt
If one spouse files bankruptcy after separation but before the divorce is finalized, it can also have a significant impact on your financial health.
In addition, during the divorce proceedings, one spouse could be made responsible for paying a joint debt. If they ignore the payments or fall behind, the other spouse will be affected.
According to Experian, in the second quarter of the last reporting year:
- The average debt of a married couple climbed to more than $112,000
- For perspective, single individuals averaged little more than $51,000
- Married couples have a 15% account delinquency ratio
- Married partners have 102% higher personal loan balances than single individual
- Marital credit card debt exceeded $6,800, 41% higher than single individuals
It is imperative that you consult our experienced property division attorneys to discuss strategies to protect your financial future.
How Does California Characterize Debt in a Divorce?
Married couples and those involved in a domestic partnership are subject to California’s community property laws.
Community law dictates that a registered domestic partnership or marriage makes two people one under the law. Assets and debts, therefore, are part of this community.
Community property is anything acquired during the marriage, including properties, clothes, jewelry, automobiles, and more. However, anything a person had before the marriage is considered separate property. Separate property also includes any inheritance or gifts given to one spouse and not the other.
A property division lawyer will evaluate the marital debt and determine which is subject to community debt or considered separate debt:
- Community debt: Debt that was incurred after marriage but before official separation
- Separate debt: Debt that accumulated before the marriage or after separation
A skilled family law attorney will help you assess the debt and gather supporting documentation.
Is the Date of Separation Important to Determine Debt?
The date of separation is crucial to determining what is separate or community debt. Unfortunately, official separation can be a complicated subject.
One spouse may feel that the separation began when their partner stayed at a hotel for a week, only to come home and decide that divorce was in their best interests. Another may feel separation began when the spouses began sleeping in different rooms.
California holds a two-part test to establish the official date of separation:
- Is there a physical separation between spouses?
- Is there an intent to end the marriage?
It should be noted that trial separations do not satisfy the intent test. Our divorce attorneys can help determine the date of separation and provide supporting arguments before the judge.
What is Reimbursement for Post-Separation?
When a spouse uses separate property assets to pay community debt after the date of separation, the court can order that spouse to reimburse the other. However, any reimbursement is at the court’s discretion and can be denied.
The court will not order reimbursement if:
- The assets can be considered a gift
- The spouse made the payments as a form of spousal support
- Both parties agreed there would be no reimbursement
- The court believes it would be unreasonable or unfair
Spousal reimbursement can be a complicated matter in divorce due to its subjectivity.
What if the Debt was Accumulated Without Your Consent?
There are circumstances where one spouse has accumulated debt without the other’s knowledge or consent. It is crucial to speak to your property division attorney and list any debts that have been intentionally kept secret.
The division of debt is entirely up to the court. A California judge may rule that all debt should be divided equally. Or, if the debt was kept hidden and entirely incurred by one spouse, they may assign the debt to one spouse.
Your attorney can help assess your financial situation and argue on your behalf if any debt was accumulated without your knowledge.
How Do You Protect Your Financial Health During a Divorce?
There are a few strategies an experienced property division attorney can employ to protect your assets and shield you from unfair debts. At Pedrick Law Group, APC, representing our client’s best interests includes various financial tools depending on each unique marital circumstance.
The following are some methods that may safeguard your financial health:
- Close all joint accounts and open accounts only in your name
- Cancel shared credit cards and transfer the debt to each person’s name
- Transfer joint car insurance policies to one spouse and the other
- Refinance any outstanding loans and mortgages
- Obtain a copy of your credit report and monitor any activity
- Ask your attorney to conduct a cash flow analysis to help maintain your financial health during the divorce proceedings and prepare for life after
- Change and update your will and estate plan
- Consider tax obligations
- If one spouse owes back taxes but the other does not, consider applying for Innocent Spouse status
First and foremost, consult an experienced divorce attorney. Marital assets and debts can be very difficult to separate. Our skilled legal team has the resources you need to protect yourself from being assigned your spouse’s debt unfairly.
How Our Orange County Property Division Attorneys Can Help
Asset protection is best if representation is obtained immediately. Call the esteemed legal team of Pedrick Law Group, APC, today for a consultation.
Our property division attorneys in Orange County can engage several strategies to retain your financial assets and protect you from any unreasonable debt your spouse may have accumulated after separation and before your marriage.
Under some circumstances, when a spouse willfully or maliciously incurs debt without your knowledge, our attorneys will aggressively advocate on your behalf.