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Dividing debts in divorce: Who owes what?

On Behalf of | May 28, 2024 | Property Division

When marriages end, concerns about the division of assets like homes and cars often arise. However, what happens to the couple’s debts can have just as significant an impact on their finances after they finalize their divorce. What should you know about handling debt during the divorce process?

Who is responsible for the debt?

Before diving into who owes what, it is essential to differentiate between community property and separate property. Debts incurred during the marriage are generally community property. As a result, those debts are the responsibility of both partners. These can include credit card debt, mortgages, car loans, and personal loans.

Separate debts, on the other hand, include the debts acquired before the marriage or after separation. These debts usually fall on the individual who incurred them. Typically, this also includes student loans.

What happens to debt during a California divorce?

In California, couples share responsibility for debts taken on during the marriage. Upon divorce, they must typically divide debts such as credit card charges, car payments and home loans equally.

The court considers several factors when assigning debt responsibility post-divorce, including each person’s ability to pay, who retains property associated with debt and the origin of the debt. For instance, the person who keeps the family home may also continue to pay its mortgage.

Can you protect your finances when dividing debt?

Reaching a fair resolution when dividing debt in a divorce requires open communication and a willingness to negotiate. Some steps you can take include:

  • Get a clear picture of your debts – List all debts, whether they are in joint or individual names, and obtain credit reports to ensure all debts are accounted for.
  • Close joint accounts – Closing or freezing joint credit card accounts prevents your spouse from using those cards and creating debt that you may need to pay off.
  • Keep records of your payments – As you pay off joint debt after the divorce, keep detailed records of your payments. If your ex-spouse is responsible for certain debts, monitor the accounts to that they make those payments; this can help you protect your credit score.
  • Be prepared to negotiate – Work with an attorney who can help you navigate the financial challenges of divorce. Ensure these your divorce decree clearly outlines the responsibilities you negotiate.

Dividing property and debts can be daunting. However, with the right strategy, it is possible protect your finances during divorce.