Complex Property Division Lawyers in California

How Is Debt Divided in a Divorce?

Debt is a staple for many families. Mortgages, car payments, student loans, credit cards, medical debt, and many other forms of debt linger in the finances of most American households. But what happens to these debts when a couple divorces? Like marital property, marital debt is considered community property, and is subject to division. Unfortunately, dividing debt may not be as straightforward.

Community vs. Separate Debts

Community debts are debts acquired during the marriage. These include debts that were accrued during the marriage by one spouse, such as credit card debt or a tax obligation. Separate debts are debts that are incurred by one spouse before the marriage or after the separation of the couple. These debts belong solely to the spouse that incurred them, and the other spouse will not be responsible for them. Separate debts are not subject to division under California law.

Date of Separation

In California, the date of separation is critical for determining the division of debts. The debts incurred by each spouse are considered separate property after the couple has separated. This means that only the spouse who caused the debt will be responsible for it. It can be difficult to determine the date of separation, however, since it isn’t always easy to prove the legal terms of separation have been met.

Under California law, separation is determined by:

• Physical separation. The spouses must be living apart from each other. It is likely that one spouse will have moved out of the shared home, but it is also possible that the court may decide the spouses are separated when they are sleeping apart from each other.
• Intent to end the marriage. The spouses must prove that the separation was made with the intent to permanently end the marriage, and is not a trial separation.

Proving the date of separation can be difficult, but an experienced divorce lawyer can help you document the necessary evidence to help you demonstrate the separation. Doing so is important, especially if your spouse went on to accrue considerable debt after you were separated. If you cannot prove separation, you may also be responsible for the debt.

How a House is Divided in Divorce

It is likely that a mortgage is the largest debt that a couple will need to divide, and it can be one of the more difficult debts to divide. The simplest scenario occurs when a couple uses marital funds to purchase a home, and are both equally responsible for the debt. Typically, in a case like this, the court may order the home to be sold, and the proceeds to be equally divided between the spouses. The court may also order one spouse to buy out the other, making one spouse solely responsible for the home and the mortgage.

In cases that mix shared and separate property, it is less clear-cut. If one spouse purchased a home before the marriage, and the other contributed to the mortgage or contributed to improvements on the property, both spouses will have interest in the house. The court may order the spouse who purchased the home to reimburse the contributing spouse for the contributions they have made.

Understanding Community Property vs. Separate Property in California

In California, property is classified as either community property or separate property during a divorce. It's important to understand these categories, as they influence how assets are divided.

• Community Property: This includes any property acquired during the marriage. Both spouses equally own this property, regardless of who paid for it.
  • Example: A home purchased while married, or income earned during the marriage.
• Separate Property: Property that was owned by one spouse before the marriage or acquired by gift or inheritance during the marriage is considered separate property.
  • Example: A house inherited by one spouse or savings from a job before the marriage.

Common Misconceptions:

• Gifts between spouses are often thought to be community property, but they are separate property if the gift is clearly intended for only one spouse.
• A property purchased in one spouse's name during the marriage can still be considered community property if the funds used were earned during the marriage.

Business Valuation and Division in Divorce

When a couple divorces, any businesses owned by one or both spouses must be valued and divided. Here's how the process generally works:

Valuing the Business: The business will be assessed by an expert, such as a forensic accountant, to determine its fair market value. This process may involve:

• Reviewing financial statements, tax returns, and assets.
• Considering future earnings potential.

Dividing the Business: The business is usually considered a community asset, but this depends on how it was acquired and maintained during the marriage.

• The spouse not involved in the business may receive a portion of the business’s value or other assets to equalize the division.

Spousal Support (Alimony) and its Impact on Property Division

Spousal support, or alimony, is financial assistance awarded to a spouse after a divorce. It can affect the property division process in several ways:

How Much Support Is Awarded: The court considers factors like the length of the marriage, the standard of living during the marriage, and each spouse’s financial needs and abilities.

Duration of Support: Spousal support may be temporary (during the divorce process) or long-term (post-divorce). The longer the marriage, the more likely long-term support is awarded.

Impact on Property Division: In some cases, the court might factor in spousal support when dividing property to ensure fairness. For instance, the spouse receiving support may get a larger portion of the marital assets.

Understanding these topics helps navigate the complexities of divorce and ensures that both parties are treated fairly.

Frequently Asked Questions (FAQs)

What factors are considered when dividing property in California divorces?

In California, property division during a divorce primarily follows the community property law. This means that property acquired during the marriage is generally divided equally. However, factors such as the length of the marriage, each spouse's financial situation, and any prenuptial or postnuptial agreements may influence the division of assets.

Can one spouse be awarded a larger share of the property?

Yes, while California typically divides assets equally, there are instances where one spouse might receive a larger share, particularly if there are special circumstances such as significant financial contributions or if one spouse is entitled to spousal support.

How is the value of a business determined during divorce?

When a business is involved in a divorce, it must be accurately valued to determine its fair market worth. A forensic accountant or a business valuation expert is usually employed to assess the value of the business based on its assets, earnings potential, and any other relevant financial data.

Is there a difference in how assets and debts are divided?

Yes, while property acquired during the marriage is generally treated as community property, debts incurred during the marriage are also considered community debts. This means both assets and debts are subject to division. However, debts incurred before marriage or after the separation are treated as separate debts and are not divided.

How can spousal support impact property division?

Spousal support, also known as alimony, can have an impact on property division. In some cases, the court may factor in spousal support when determining how to divide property, with the spouse receiving support potentially receiving a larger portion of the marital assets to ensure fairness.

Do I need to hire experts for property division in a divorce?

It is often recommended to hire experienced, especially for complex property division cases. These professionals, such as business valuators, real estate appraisers, and tax accountants, can provide an accurate valuation of assets and help address any legal or financial complexities in the divorce process.

How does the court decide who gets the family home?

The family home is often one of the most valuable assets to be divided in a divorce. The court may order the sale of the home, with the proceeds divided equally, or it may award the home to one spouse, who will then buy out the other's share. In cases where the home was acquired before the marriage, the situation can be more complicated.

What if my spouse’s debts were accrued after separation?

In California, debts incurred after separation are generally considered separate debts, meaning that only the spouse responsible for those debts will be liable. However, proving the exact date of separation can sometimes be challenging, so legal assistance is often necessary to ensure the correct allocation of debt.

Contact Our Divorce Firm in San Diego, CA

We are here to protect what you have earned, to make sure it is divided fairly and to ensure you and your family are provided for in the future.

If you have questions and wish to schedule a consultation with one of our lawyers, contact our law firm at (619) 577-4900 or by contacting us online. Our primary law office is in La Mesa, California, near the San Diego State University College area. We also have a satellite office in La Jolla available by appointment only.