The Division of Debt upon Dissolution in California

Posted By Eric Martinelli || 12-Oct-2012

California Family Code section 910 provides: "Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt."

As I shared in a prior blog, assets acquired during the marriage, subject to a few exceptions, are considered community property, subject to equal division upon dissolution. Likewise, debts incurred during the marriage are also subject to equal division. It does not matter if the debt was incurred by one spouse for his or her own benefit or if the debt benefited the family. Further, it is irrelevant if the debt is only taken in the name of one spouse. If the debt was incurred during the marriage and prior to separation, it is considered community debt and both spouses are equally liable. This means that when the parties are contemplating settlement, or prior to trial, the marital balance sheet must carefully detail any and all debts and liabilities incurred during the marriage.

Of course, paying large sums of money to reimburse a spouse for marital debt may be a tall order in the midst of a dissolution. However, the parties are free to be as creative as needed to reach a fair agreement. For instance, one option might be for a spouse to assume joint debts in return for a greater share of the community property (assuming the community has assets with equity). The spouse paying the debts can at least ensure that joint debts are paid, because as long as debts are jointly owed, both spouses are financially responsible to the creditors.

Occasionally, the distinction between community and separate debt is difficult to discern. For instance, some debts incurred during the marriage are excluded completely from division at divorce. These debts would include educational loans and liabilities associated with tort judgments. But even with these examples, there are exceptions.

Our office is located in Santa Clarita, serving communities in Saugus, Canyon Country, Valencia, Newhall, and more. If you have any questions regarding divorce, child custody, child support, or questions regarding the division of debts upon dissolution, please call Eric Martinelli with the Martinelli Law Group for a free consultation.

Categories: Divorce

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