Splitting Liabilities in a CA Divorce

Splitting Liabilities in a CA Divorce

Dividing assets and liabilities in a California divorce can be problematic. Some elements of property division are not cut and dried, and many factors can influence how these arrangements are made. Many are concerned about getting their share of the assets from a marriage, but what happens to the debts?

Certified Family Law Specialist Judy L. Burger addresses the complexities involved in splitting liabilities in a CA divorce and how she can help.

Community Property and Debt

California operates under the community property principle, a system designed to ensure fairness. This means generally that, in the absence of other arrangements, both parties will receive an equal share of everything they acquired while married. Any separate property owned before the marriage or obtained after the separation remains the owner’s sole property, providing a sense of security in the process. There are complex exceptions to the division of property acquired during marriage or prior to marriage. 

However, the community property principle also applies to debt. Other arrangements can also come into play here, but typically, both parties in a divorce are responsible for half of the debt incurred  during the marriage.. Unfortunately, these issues are not always so black and white—they more often appear filled with grey areas.

A CA Property Division Lawyer like Judy Burger can work with you to help make the best decisions and arrangements.

Dividing Debt in a California Divorce

Property division can be confusing because of so many potential exceptions relating to community, separate, and co-mingled assets. Here are just a few potential examples:

  1. The divorcing couple’s marital debts are greater than the value of their community assets. A family law judge may assign more debt to the spouse earning more income.
  2. Some marital debt incurred by one spouse may be ruled as separate debt by the judge due to extenuating circumstances (like a cheating spouse using family money to buy gifts or fund travel for the affair).
  3. Student debt funded by marital income may be ruled as separate debt to the one benefitting from the education. One spouse may be directed to reimburse the other for a portion of the student debt already paid.

Complex situations like these are why you need an experienced CA property division lawyer on your team to help ensure you are treated fairly.

Date of Separation and Property Division

California is somewhat unique in that it uses the date of your separation to distinguish between most marital and separate property. Most other states use the official date of the divorce. Once both parties agree the marriage is over, they are considered to be leading separate lives (even if they still live together). From that moment, both are acquiring separate assets and debts.

This is a significant matter in your divorce, but agreeing on a specific date of separation can be tricky. The exact date can be argued from many points and affects which assets and debts are to be retained, split, or surrendered to the other spouse.

Get Experienced Help with CA Property Division

California Certified Family Law Specialist Judy Burger has the resources, working relationships, and expertise to help with the most complex property and debt divisions and business valuations. She harnesses the expertise of various professionals to help ascertain pertinent facts that influence who should be responsible for debts and how assets are to be divided.

Spouses and their attorneys cannot always be trusted to act fairly, so you need an experienced lawyer guarding your best interests. Decisions and arrangements made during these negotiations can affect your life and future. Contact Attorney Judy Burger at one of her eight offices conveniently located throughout California to schedule a consultation.

 

Epstein Credits and the Family Home

“Epstein” Credits and the Family Home

As a couple moves toward a divorce or legal separation, one potentially hotly contested issue involves what is known as “Epstein” credits. “Epstein” credits were named after the case in which they were first recognized, In Re Marriage of Epstein, which was decided by the California Supreme Court in 1979. These credits may be given to a party who pays community debt with separate property funds before a divorce or legal separation is final. If you are unfamiliar with the nature of community and separate property, please see our blog here.

The issue of Epstein credits often comes up when one party stays in the family residence with the children after the couple is separated. These credits are based on the notion that the family residence is community property and that both parties have a right to receive the benefit of that property until community assets and debt have been allocated by the court. The parties could benefit from the property in different ways: by staying there themselves, by renting it out, or by selling it. Therefore, when one spouse stays in the home, he or she is receiving a benefit and also depriving the other spouse of beneficial use of the property.

Epstein is not limited, however, to the family home. These credits may be requested any time preexisting community debt is paid with the separate property of one spouse. For that reason, they may apply to credit card debt, vehicle loans, and tax payments. However, the party requesting these credits must be able to show that a community debt was paid with his or her separate funds, such as income earned after the date the parties separated. When Epstein credits are awarded, the spouse who paid the community debt is entitled to be reimbursed out of community property assets.

Additionally, the right to Epstein credits may be extinguished under certain circumstances. For example, no Epstein credits will be awarded if the debt payment was intended as a gift, if the parties agreed that no reimbursement would be made, or if the payments were made in place of spousal support.

As you might imagine, both the date of separation and the nature of the debt involved are critical to a court’s decision of whether to award Epstein credits.

Because the legal issues in determining how property and debt are owned are significant, the assistance of an experienced divorce attorney can materially change the outcome of a divorce or separation matter. For these issues, you need an attorney with substantial experience in Northern California who will represent you aggressively. Please contact The Law Offices of Judy L. Burger at (415) 259-6636 to learn more.

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.