How Is Debt Divided in California Divorces?

How Is Community Debt Divided in California Divorces?

Have you ever wondered how community debt is divided in a California divorce or legal separation? State law mandates that a couple’s community estate be divided “equally”, taking into account both assets and debt. It also provides several specific rules for dealing with debt.

Debt may be allocated as separate debt, community debt, or a combination of both. This determination is similar to the way community assets, or property, are handled. If you are not familiar with the concept of community property, please see our separate blog here.

As you might expect, separate debt is allocated to the person who incurred it. For example, under most circumstances, debt incurred by one of the parties either before or after the marriage will be the responsibility of that party. An additional category of separate debt about which many are unaware is debt incurred during the marriage that was “not incurred for the benefit of the community”. This type of debt is treated as the separate debt of the person who incurred it.

Community debt is handled differently. Under ideal circumstances, the parties agree on how they would like to allocate community debt; however, even if they do agree, the division of debt is not official until a judge enters a final order approving their agreement. If the parties cannot come to an agreement, the judge will do it for them.

The law provides additional rules to distinguish community from separate debt. Debt incurred after marriage but before separation is usually community debt, even if it is only in one spouse’s name. An example of this would be a credit card acquired during the marriage in the name of one spouse. The separate or community nature of debt incurred after separation but before judgment is entered depends on whether it was incurred for the “common necessaries of life of either spouse . . . or the children”. If the debt was for common necessaries, the court will allocate it according to the parties’ need and ability to pay it. If the expense was not for common necessaries, it will be allocated to the party who incurred the debt.

In allocating debt, there are additional considerations, called “reimbursements” or “credits”, that the court may assign due to payments made on the family home after separation, the use of the family home after separation, and payments made for education or training. These topics are discussed in separate blogs on our website.

If a couple’s community debts exceed its assets, the judge will assign excess debt according to what is just and reasonable. The court may consider the parties’ ability to pay, relative to one another, in making this determination.

The manner in which debt is allocated in a divorce or legal separation can impact you for the rest of your life. In hotly contested matters involving debt division, you need an attorney to protect your interests. The attorneys at the Law Offices of Judy L. Burger have extensive experience in property and debt division. Call today: (415) 293-8314.