Understanding the impact of debt in a California divorce

The financial decisions made during a divorce are among the most important that two spouses can ever make as they go their separate ways. These decisions will run through every aspect of the divorce, including child support, alimony and property division. For this reason, many Californians who face the end of a marriage are concerned about the fate of their assets. One common issue – debt – is something that both spouses need to address.

In many cases, one spouse is concerned that he or she might be liable for debts the other spouse incurred. This issue arises not only during divorce but also when debt collectors are contacting both parties for payment. The actual responsibilities of both spouses when it comes to debt acquired during the marriage depend on the circumstances and whether any agreement is involved.

For example, when both spouses purchase a house, the one who signs the promissory note, and not just the mortgage, is personally liable for the debt and can be sued in court. In the case of the other spouse who merely signs the mortgage, he or she cannot be sued in court – but his or her interest in the property may be subject to foreclosure if the other spouse fails to pay off the debt.

In instances where one spouse does not sign the agreement, the property is still considered jointly owned property, which means that it can be seized or garnished by the creditor. Jointly owned properties may range from bank accounts to automobiles and include personal properties held by both parties.

In community property states like California, debts incurred during the marriage are the obligations of both spouses. Much like every child custody or property division, spouses should understand debt’s potential impact on their divorce settlement and their financial lives after divorce.

Source: Tribune Interactive, “Are you responsible for your spouse’s debt?” Chesley Payne, Dec. 16, 2013

2022-03-25T08:19:26+00:0029 Dec 2013|
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