Many of the legal aspects of divorce focus on splitting assets and custody of children if applicable. However, property division not only includes what you own but also what you owe. You have to divide your debt as well. Although you both are responsible for any debt you incurred while married, paying it isn't as simple as splitting the balance 50/50. There are many considerations for dividing debt in divorce in California to make it as fair and smart as possible.
Fair share of debt
California law states that all marital property, including debt, belongs equally to both spouses, no matter who accrued it or whose name it's under (with the exception of gifts and inheritances). Come up with an agreement on how you will divide assets and debt so that the net values are equal. This means each of you doesn't have to pay exactly half of all debts, but rather that you can create combinations that lead to a fair and roughly equal outcome. For example, the one who gets the house may also take the higher credit card balance. If you can't agree on property and debt division, the court will decide for you.
Tips for managing debt
Follow these tips to manage your debt in a divorce:
- Freeze credit card accounts to prevent further debt accumulation. Make small monthly payments to reduce the balances. If you have a large amount of debt, it may be useful to sell property or keep a joint bank account for making payments.
- Understand that creditors don't abide by divorce arrangements. Any marital debt your ex-spouse doesn't pay, the creditor can go after you for. One way to avoid this is for the spouse responsible for the joint debt to open a credit card account in his or her name only and transfer the balance to the new card.
- Debt agreement doesn't go into effect until the judge approves it. Before then, you are both responsible for debt even if you've already informally divided it.
Hire an attorney
Divorce is messy enough without the financial aspects, let alone with them. Hiring an attorney familiar with California community property laws can help you to avoid making costly mistakes. An attorney can also help you figure out how to determine property value, and what property is communal and what is separate. A lawyer is also useful in comparing the Schedule of Assets and Debts forms between you and your spouse. It's best to have qualified legal assistance and representation to navigate the complexities of divorce and ensure your future financial security.