What Happens to Your Debts After 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 division. Unfortunately, dividing debt may not be as straightforward.

What is Community Property?

Community property, in California, refers to property that has been acquired during the course of a marriage. While this term applies to property and assets, it can also apply to debt that is acquired during the marriage. Unless the spouses have an agreement regarding separate property, such as a prenuptial agreement, debt accrued during the marriage is the responsibility of both spouses until it is divided.

Typically, marital debt is divided evenly between the spouses. There is an exception to this, which occurs when the amount of debt is greater than the value of the community assets. In this case, a greater amount of the debt will be assigned to the spouse in a better financial position. If one spouse has more separate property than the other spouse, a greater income, or a better earning ability, they may receive a larger share of the debt in an unequal division. This is intended to ensure that one spouse isn’t financially crippled by even debt division, and that the division reflects what is fair for both spouses.

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.

Dividing a Mortgage

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.

Consult a San Diego Divorce Attorney

If you are facing divorce, you should get in touch with our caring, experienced team of San Diego divorce lawyers. At the Law & Mediation Firm of Klueck & Hoppes, APC, we are committed to offering our clients and their families compassionate, effective legal counsel to aid them through this difficult time. We are backed by more than 30 years of collective experience, and are passionate about helping families resolve their family law issues. Our team is prepared to help you address a number of simple and complex legal issues, and to find innovate and affordable solutions for each client. Get started with an initial case evaluation today.

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