Spousal debt liability can pose a serious problem during divorce. Here’s some information on how to protect yourself.
Spousal Debt Liability in CA
Because California is a “community property” state, assets that are acquired and debts that are incurred by either spouse during the course of the marriage belong to both spouses equally, and therefore will need to be divided equally between the spouses during the divorce. This is how the court will decide unless the spouses have created their own agreement regarding how property and debt will be divided – this is either done with a prenuptial agreement or other agreement.
Equal Division
While a court might not divide each asset and debt in half, the goal of the court is equal division. The only exception to this is when the value of community debts exceeds the value of the community assets. Family law allows the court to assign the debts to the spouse who is in a better financial position, and thus able to pay them.
Community Debt v. Separate Debt
Community Debt is the debt incurred after the date of marriage up until the date of separation. The debts belong to both spouses equally, even if only one spouse incurred it.
Separate Debt is the debt incurred prior to the marriage or after separation. These debts only belong to the spouse that incurred them.
Working with a divorce attorney can help you settle whether your debt falls under community or separate debt, as well as how to best preserve your assets during divorce.
Source: DivorceNet.com, Dividing Debts in a California Divorce, 2014