Debt During Divorce: Who’s Responsible?

A big question often arises in divorce settlements – who is responsible for the debt? It’s a complex question requiring a degree of nuance in determining. In particular, California divorces have unique circumstances relating to community property.

What is community property?

Community property is a critical concept to keep in mind when initiating the divorce process, especially in California, a community property state. Any income of either spouse and real or personal property acquired by either person during the marriage falls under community property – though this does not include gifts or inheritances.

This means that both spouses share equal ownership rights for any earned income or property – but beware that this means debt also falls under community property.

Who is responsible for any jointly accrued debt?

Under California community property law, any financial obligations incurred during your marriage become the responsibility of both spouses during a divorce. Premarital debts brought into the marriage could also become the responsibility of both parties.

There are, however, some exceptions to this. Separate property is acquired before entering the marriage and therefore does not become shared community property. This can be things like a house or vehicle owned before the marriage. As long as the funds for payments on this property come from a separate source and not from income generated during the marriage, the property remains separate.

If funds do become mixed, this is considered co-mingled property and can be tricky to sort out. This can happen in situations where an initial property was considered separate but was sold, and the funds were then used to buy another asset that was partially paid for with community income as well.

How can you protect yourself from liability?

For individuals who are considering nuptials but haven’t yet said “I do,” a pre-nuptial agreement is worth discussing. An agreement like this might outline that both spouses agree to treat their debts and income separately.

While no one wants to think about a future divorce as you plan a wedding, a pre-nuptial agreement can ensure you and your spouse-to-be are on the same page in the event something should happen down the road. This allows you to discuss with a level head, not in the event of a divorce when emotions are running high.

How can an attorney help?

Although community property can be a complicated matter, it doesn’t necessarily mean that you need to appear before a judge to sort out the property division. Often, attorneys can help a divorcing couple come to an agreement, though note that in California, a judge will still need to sign off on the final agreement with a court order to ensure its validity.

If you have questions regarding a division of debt in your divorce, call (408) 553-0801 or click here to schedule a free 30-minute Family Law or Estate Planning consultation. Lonich Patton Ehrlich Policastri’s experienced attorneys specialize in divorce and family law and can help with your divorce-related debt questions.  With over 100 years of combined experience, the Family Law group at LPEP can help you navigate even the most complex of family law and estate planning matters in California.