Dividing Debt in a Divorce
By Henry F. Lewis on March 26, 2019
Divorce can be a difficult time for all involved. Having an experienced divorce attorney on your side can help ease the transition and make sure assets are divided fairly and appropriately.
Although many people focus on dividing assets, including property, many may not realize that marital debt is also divided during a divorce. Divorce attorneys Michael A. Gardner and Henry F. Lewis help clients through the complicated process of dividing debt in a divorce. If you live in or around Oakland, CA and are facing divorce, you are encouraged to contact the attorneys of Gardner & Lewis, LLP.
Debt, Like Property, Are Divided in a Divorce
Property and assets are not the only thing that must be divided in a divorce. Marital debts are also subject to division.
As a community property state, California law holds both spouses liable for all debt accrued during the marriage. In the event of a divorce, a separating couple may choose to divide the debt in a way they both feel is fair. If the couple is unable to come to an agreement on how to divide the debt, a judge will determine how the debt should be divided.
Debt Is Not Always Equally Divided
In most states, including California, debt may be divided completely equally or unequally but fairly. When divided unequally, other factors are often considered, specifically the division of assets, helping to justify assigning more debt to one spouse. In other words, the party awarded more assets is also likely to be assigned more debt.
An example of this would be one spouse being awarded a car purchased during the marriage that is not yet paid off. This spouse would likely be held responsible for making the remaining payments since he or she will be keeping the car. Although this can make the division of debt unequal, such a division is fair because the spouse gets to keep the car after the divorce.
Determining How to Divide Debt
Determining how to divide debt varies depending on each couple and the circumstances of their divorce. With that said, a good place to start is making a list of everything owned and owed by both parties. From there, both parties can determine which items are community property, separate property, and how much items may be worth.
Once a list of assets and debts is created, both parties can try to come to an agreement on how to divide the property and debt so that each ends up with roughly the same net amount. If an agreement cannot be reached, the divorce settlement can be decided by a judge.
Divided Debts Must Be Paid
It's important for people who have debt to divide in a divorce understand that it is each person's responsibility to pay the debt assigned to them, whether it was assigned through a mutual agreement or by a judge.
Failure to pay an assigned debt may result in creditors pursuing the other party for payment. This is because a divorce decree does not absolve a former spouse of his or her responsibility to a creditor, even if the decree assigns the debt to the other spouse. The decree simply outlines each spouse's obligations.
Accordingly, it is often in the best interest of divorcing couples to work with creditors to amend their loan or credit contract to have the party who wasn't assigned the debt removed from the account. Another option is to have the party assigned the debt to open a new line of credit in only his or her name to pay off the joint debt.
Contact the Divorce Attorneys of Gardner & Lewis, LLP
If you are in the middle of a divorce, the attorneys of Gardner & Lewis, LLP can help. To schedule a consultation, please call (510) 451-4822.
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“The needs of your family are always at the forefront of our legal services. Whether through litigation or mediation, we believe that reaching a fair, efficient solution with minimal negative impact to your family is of the utmost importance.” Henry F. Lewis