Who Is Responsible For The Debt In A Divorce?

who is responsible for the debt in a divorceIn a community property state like California, divorce law handles assets and debts acquired during the marriage as a 50/50 responsibility. In some marriages, the allocation of who is paying what is more complicated than any other part of the divorce agreement, especially if there isn’t any property or significant assets to speak of.

Splitting Debt In A Divorce: Who Pays What?

Assuming there was no prenuptial agreement, any and all debt incurred prior to the marriage belongs to the individual who incurred the debt. Any debts acquired during the marriage are shared by both parties. This includes credit cards that are only in one or the other spouse’s name, debt one of the spouses may not have known about, and so on.

If determining who pays what is causing more tension or escalating emotions as you plan to divorce, I recommend scheduling a divorce mediation session ASAP. Working with a neutral third party who can review all of the debts and hear both sides can go a long way toward de-escalating the situation. Together, we can work on agreed payment plans that make sense based on your stories.

Are Any Debts Considered “Separate?”

Some debts are considered “separate:” 

Debts brought into the marriage

If you had credit debt, an active car loan, a mortgage, etc., that was in your name before the marriage, they are held separately from the community property debt. Now, with something like a mortgage, there may be some gray area – especially if your spouse moved into the home and you made payments together. In that case, the courts may use a mathematical algorithm to determine how that property is divided.

In almost all cases, any debt brought into the marriage is considered separate, and the remaining payments are the responsibility of the original debt holder.

Debts in a divorce incurred after you legally separate

If your spouse is not good with money or has more debt than you do, we recommend pursuing a legal separation before you get divorced. This protects you from any spendthrifty ways that continue throughout the divorce proceedings. From the date of your legal separation, the court views any future debts or property acquisition as an individual and not part of the community property state. 

So, for example, let’s say that your spouse moves out of the master bedroom and into a spare room or couch because you can’t afford separate places yet. In the meantime, s/he takes out a new credit card or purchases a new car in their name. You will be responsible for 50% of that debt, even though, as a couple, you’d agreed to be “separated.” 

If you get legally separated, even if you have to live in the same house, their debt remains their debt, just as your new debt remains yours. There are some gray areas if that debt was used to pay share expenses or to purchase necessities for the children. However, common sense prevails when the court reviews expenditures either party balks at having to pay.

Am I Responsible For My Spouse’s Student Loan Debt In A Divorce?

Any student loans taken out before you were married remain separate from the community property pot. However, any new student loans taken out by either of you after marriage are considered shared debt. So, if you took out a loan to complete your undergraduate degree prior to getting married, you are 100% responsible for the remaining portion.

If you decide to pursue a higher education level and take out more student loans during the marriage, that portion of the debt is split 50/50 between both of you. 

What If My Spouse Had Credit Cards I Didn’t Know About?

This happens all the time and can be earth-shattering for the spouse who was kept in the dark. Unfortunately, even hidden debts are your responsibility if they were taken on during the marriage and before legally separating. In some cases, judges may rule that traditionally shared debt will be handled as separate debt. 

It could happen if there was a different p.o. Box or mailing address used or if the debt was used to pay for elicit content or illegal or nefarious services. Again, judges review this on a case-by-case basis. Remember that the same type of people who hide spending from their spouse often try to hide assets in the divorce. This is a big no-no. Hiding assets is illegal, and judges do not take it lightly.

If you suspect something like this has happened in your marriage, you may want to consider hiring a private investigator to run a complete asset search. If you find hidden assets and bring that evidence to light through your attorney, the judge is more likely to also rule in your favor on the hidden debts.

Work With A Divorce Attorney In Contentious Debt Situations

If there is a dispute about who should pay what when it comes to community debts, it’s best to work with a divorce attorney. Together, we’ll work to minimize the tension and come to a joint agreement that is in the best interest of both parties. Contact The Law Offices of Gerard A Falzone to learn more about divorce mediation services or to schedule a consultation.