Divorcing and in Debt
California is a “community property” state, which means that any assets acquired and any debts incurred by either spouse during the marriage belong equally to both spouses. During your California divorce, you and your spouse will have to agree on how to divide both your assets and your debts. There are several ways to divide debts and assets.
It is possible to divide both assets and debts equally. You each get half the contents of the bank account, you sell the house and split the proceeds, and you each pay half the debt. Or, you can sell property to pay off your debt and split the proceeds. Another option is to use debt to balance out the division of marital property.
For example, you have two accounts. One has $12,000 and one has $7,000. You also have $5,000 in credit card debt. If one spouse gets the $7,000, the other gets $12,000 and the credit card debt. The credit card debt balances out the assets and makes for fair division.
One thing to keep in mind is that creditors may not honor your agreement. You and your spouse may have decided that he will pay the car loan, but if your name is on the contract, you are still liable for the debt. If your husband stops paying, your credit could be affected. If it is his credit card debt, you may also be responsible for interest and late fees.
To avoid this problem, consider selling property to pay off debt before the divorce. If this is not an option, suggest that your spouse refinance the car or pay it off by taking out a loan in his name. Use a balance transfer to move credit card debt to a card belonging to your spouse.
What can you do when there are more debts than assets in a divorce? In this case, the court may assign the excess debts to the spouse who is in a better financial position to pay them.
Every situation is unique. To make sure your interests are protected, consult a San Francisco divorce attorney. To make an appointment, contact The Law Offices of Paul H. Nathan at 415-341-1144.