When processing a divorce, it is necessary for debt to be divided. Here’s what to know about dividing community debt in a California divorce.
In California, each spouse owns half of the community property and is therefore responsible for half of the community debt. In most cases, community property and debt are divided equally among divorcees. It’s important to understand which property is the community, separate, quasi-community, or mixed.
What is Community Property?
Community property is everything spouses own together, including debt or assets obtained while married or in a domestic partnership.
Community property also includes all earnings either spouse earned during marriage and assets bought with such earnings. Purchase money earned during a marriage belongs to both spouses.
Community property includes all financial obligations (debts) accumulated during a marriage or domestic partnership, even if debt was incurred by or a credit card was in the name of only one spouse.
How Are Community Property Divided During a Divorce in California?
In California, each partner owns half of the community property and is responsible for half of the debt. Community property and community debts are usually divided equally.
Related: How Property is Divided in a California Divorce
What is Quasi-Community Property in a California Divorce?
Quasi-community property is property acquired by either spouse when living in another state AND qualifies as community property in the state of California. A spouse who lives outside of California during the marriage is entitled to half of their partner’s earnings, real estate, or community property acquired in California as quasi-community property.
What Qualifies as Separate Property in California?
Separate property is anything owned before marriage is registered. Inheritances and gifts to one spouse, even during the marriage or domestic partnership, are also separate property. Rents, profits, or other income earned from the separate property also qualify.
Separate property may include income or assets one spouse acquires after the date of separation. The date of separation can determine whether certain property or debt is community or separate.
If you have separate property, it belongs only to you, as long as it was kept separately. Debts can be separate property too, such as credit cards acquired after the date of separation.
Related: Community Property Laws in California
What is Commingling And How Does it Affect Division of Property?
Assets can be simultaneously separate property and community property referred to as “commingling” because separate and community property has mixed together. Property considered both separate and community can be difficult to divide. Pensions are commonly commingled.
A lawyer’s help may be necessary to untangle a spouse/partner’s pension. A pension can be one of the most valuable assets acquired during a marriage or domestic partnership. Special rules applying to pensions are very technical and may not apply to any other asset. A pension plan must be “joined” as a party in a divorce case before a judge will issue an order about how the pension will be divided.
FAQs About Dividing Community Property in a California Divorce
What is the best strategy for figuring out how debt should be divided?
Start figuring out how debt should be divided by making a list of everything each spouse owns. Each partner should classify assets as separate and community property, and determine the fair market value of each asset. Each party must value property when filling out a Schedule of Assets and Debts.
Upon completing the Schedule of Assets and Debts, each party should resolve disagreements regarding community or separate property, and any discrepancies in valuation of community property.
Related: How to Find Hidden Assets in a California Divorce
Can divorcees take the entire community debt and split it in half?
Use caution when dividing debt. Sometimes spouses try taking the entire amount owed and dividing it in half. However, outside parties who are expecting to be paid have no obligation to honor agreements made between domestic partners or spouses.
For example, if spouse 1 has a credit card in their name, but spouse 2 agrees to pay it off to balance the division of debt, the credit card company can still pursue spouse 1 despite their divorce debt agreement.
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If you or a loved one would like to know more about dividing community debt in a California divorce, get your free consultation with one of our divorce attorneys today!