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Dividing debt during the divorce

On Behalf of | Feb 3, 2022 | Divorce

California is a community property state, which means that in its simplest form, assets and liabilities are divided 50-50 when couples split up. However, the division of debt depends on several things, including the type of obligation.

Community property and dividing debt fairly

While the community property rules state that assets and debts incurred during marriage belong to both the spouses, even if incurred under one spouse’s name, dividing the debt can go further than that. Some of the considerations by the court include:

  • The full value of the debt, which can result in individual debts not being split evenly
  • Fair division of debt
  • Each spouse’s ability to pay off the debt.

Debt from medical issues

Usually, medical debt resulting from a medical emergency or real need, and incurred during the marriage, will be divided evenly between the spouses. However, the courts might consider debts such as those resulting from cosmetic or other elective medicine in a different manner.

Mortgages and car loans

If you are keeping the car in a divorce, you will need to pay the loan. You will also need to get your ex-spouse’s name off the title and the loan. If one spouse wants to keep the mortgaged property, but the property’s title is in both names, that person will need to do a title transfer to remove that spouse from the title and they will need to refinance the home in their name only. Couples could also opt to sell the property and divide the proceeds.

Credit cards

The balance owed on the credit card is usually divided evenly if the balance was incurred during the marriage. While you can keep an individual card, you should close and pay off joint cards.

The division of debt during divorce can affect your financial health in the future. Learning about the state’s rules and regulations when it comes to debt division is very important to reach a fair settlement.