Debt Division
Debts can be negotiated into the divorce settlement agreement
Dividing Debt in a Southern CA Divorce
Who Is Responsible for Marital Debts?
California is a community property state. That means that in a divorce, all marital assets are divided equally. But, what about debt? In California, the law says that both parties are responsible for all debts that are incurred during the marriage and prior to separation. It does not matter how the debts were incurred nor who the debt benefited.
It does not matter whose name is on the bill. If the debt was incurred during the marriage, then both parties are equally responsible for that debt. These debts can be negotiated into the divorce settlement agreement. For instance, one party may take on a larger portion of the debt in exchange for a larger portion of the marital assets.
However, you must remember that your agreement is with your former spouse, not with your creditor. Creditors can still come after you for a debt, even if it is stipulated that your spouse is responsible for that debt in your divorce settlement. Thus, an important aspect of dividing debt in a California divorce is ensuring that your credit is protected.
Not paying a debt after divorce may seriously impair your credit.
Can I Be Reimbursed for Paid Debts?
What if your spouse came into your marriage with debt, and as a couple, you paid that debt off during your marriage? Under California law, you are actually entitled to be reimbursed for the amount used to pay off this debt. This also applies if one party stays in the marital residence while the other pays the mortgage. The party who is paying the mortgage is entitled to be reimbursed for those mortgage payments.
This is not the case with the payment of all debts however. If one party uses their separate property to pay off a debt that was incurred during the marriage, that payment is considered a gift, and is not eligible for reimbursement. Needless to say, the laws of debt division and payment reimbursement are quite complicated.
