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What Happens to Debt After Divorce?

Posted By Stolar & Associates, A Professional Law Corporation || 5-Jun-2017

asset divisionOnce you have made the decision to move forward with a divorce, you might be concerned about what will happen to your debt. California is a community property state, so assets acquired and debts incurred by either spouse throughout a marriage equally belongs to both spouses. Therefore, unless spouses entered into an agreement regarding the division of property and debt, the court will seek to split them evenly if possible.

The exception to this arises when the value of debts exceed the value of community assets. In such cases, the court would order an unequal division and assign the excess debts to the spouse who is in a better financial position to pay them off.

Community Versus Separate Debts

There are two types of debt to be addressed in a divorce and determining the nature of a divorcing couple’s debt is the first step.

  • Community Debt: Generally, community debt refers to debt incurred after the date of marriage and prior to the date of separation. This type of debt belongs to both spouses equally, even if only one spouse incurred them. For example, if only one spouse signed on the credit card slip for a purchase, the debt would still belong to both parties. Both spouses are also responsible for the other’s income tax obligation so long as it accrued while they were married.
  • Separate Debt: This refers to debt that either party accrued before marriage or after the date of separation. It belongs solely to the spouse who incurred them.

This might seem straightforward, but determining the date of separation is not always simple and courts sometimes hold a separate trial just to determine this date, before any other issues can be decided upon.

Date of Separation

Determining the date of separation is a crucial element in deciding the nature of a divorcing couple’s debt. When a separate trial is necessary to determine the date of separation, California utilizes a two-part test. This includes:

  1. Physical Separation: This is usually the easier element to determine. The date one spouse moves out of a shared home is the date of physical separation, though some courts might also consider sleeping apart as physical separation as well. For example, spouses can continue to live together, but if they are sleeping in different areas of a shared home, this might count as physical separation.

2.Intent: It is not enough for a couple to have been physically separated. One spouse must have an intent to end the marriage. However, temporary or trial separations will not satisfy this element.

Dividing debt in a divorce can be a complicated area of law, so you should always consult with an experienced divorce attorney to ensure you are not making any costly mistakes.

Beverly Hills Asset & Debt Division Attorneys

If you are in the midst of a divorce, you might be overwhelmed by the complexities involved in asset and debt division, both of which are often heavily contested issues. At Stolar & Associates, A Professional Law Corporation, we are here to help you protect your assets and ensure all debts are appropriately divided. Our Beverly Hills divorce attorneys are committed to helping every client protect their families and financial interests during this undoubtedly difficult time. With over 30 years of combined experience, our team brings more than legal skills to the table; we provide a truly caring perspective and give each client the personalized, compassionate, and skilled representation they deserve.

Call our office today at 310.984.1411 to schedule a consultation to discuss your case with a legal member of our team.

Categories: Divorce, Asset Division
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