How Debt Division Works in California

California is a “community property” state and that designation applies to both assets and debts acquired during a marriage. When a couple wishes to divorce, all of this community property, including debts, must be split equally between both spouses. Read on to learn more about how the debt division process works in California and how you can be better-prepared when going through it in your own divorce case.

Community or Separate?

California recognizes two forms of property: community and separate. Separate property is anything that is individually held by one spouse and not the other. This includes any assets that were brought into the marriage, any individually-given gifts or inheritances, and a few other things. Community property is anything that is acquired by either spouse during the course of a marriage. Debts are classified in a similar way: community debts are any debts incurred after the date of the marriage, but before the date of separation. This is an important concept that confuses many people: even if only one spouse incurred the debt, the state of California treats it as though it belongs to both spouses equally.

Is Debt Community Property in California?

Generally, California divorce courts will try to divide all marital debts equally, with an ideal goal of both spouses receiving exactly half of all community debts; but you are not always responsible for your spouse's debt in California. Individually-held debts are generally not considered to be community property when making this determination. Of course, there are many different types of debt and their nature can make it somewhat difficult to accomplish this perfectly-even goal.

For example, dividing a mortgage can be complicated. Usually the easiest option is that the couple agrees to sell the family home in order to pay off the debt and any remaining proceeds are divided equally between both spouses. However, if one spouse wants to keep the home, they may have to “buy” the other spouse’s share of the home, which may involve taking fewer assets or incurring a greater amount of debt. Courts may also order reimbursement if separately-held funds were used to make the down payment on a community property home.

Credit card debt on the other hand is fairly straightforward. All debt incurred from the date of the marriage until the date of separation is considered “community,” and therefore subject to equal division unless any exceptions are made by terms placed in a pre-nuptial agreement.

Do you need help with the debt division process? Let an Orange County divorce mediator work with you to find the ideal solution to your case. Call Alternative Divorce Solutions at (949) 558-2624 to request a case evaluation.