Divorce and Debt Division in Sacramento

by | May 27, 2013 | Firm News |

A critical part of almost any Sacramento divorce case is determining how to divide up responsibility for repayment of the debts incurred during the marriage.  Under California’s community property laws, debts incurred during the marriage and before separation are presumed to be debts owed by the community, not just the individual who contracted them.  (This presumption can be overcome, but it is a good rule of thumb that the debts incurred during marriage belong to both parties.)

Some debts are easy to categorize and divide.  For instance, if one spouse has student loans, the law states that responsibility for repayment is their separate duty.  However, there are many kinds of debts that can complicate the Sacramento divorce and debt settlement process.  A common debt problem is associated with the primary or family residence.  (In today’s housing market, many homes are worth far below the balance due on the primary and secondary mortgage(s).  Such underwater homes are a difficult issue because they’re financially worthless.)  If one party wants to reside in and ultimately keep the home, the court is going to expect that party to pay the ongoing mortgage, utilities and maintenance costs.  But, even if one party is awarded the family residence and is paying the costs, the other party’s name is often still on the mortgage.  This non-owning party will rightly be worried that if the owning spouse stops making the payments and the home goes into foreclosure or is short-sold, the bank will pursue the non-owning party for an asset they no longer legally own!

Other debts, such as unpaid credit card balances, can be a sticky issue.  The parties often continue to use credit after separating.  The balances incurred prior to separation are typically community debt, but the balances incurred after separation are typically the sole and separate debt of the incurring party.  If these debts are incurred on the same card, it can confuse the creditor and be difficult to reconcile in the settlement phase of the divorce.  Often times the responsibility for the cards is completely assigned to one spouse regardless of the community and separate property debts on it.  Then the party assigned is awarded a reimbursement credit for the separate property charges they are paying off.

If you are in a Sacramento divorce that has debt division concerns, please consider giving us a call.  We are experienced family law attorneys and we can help you identify debt division issues in your case and discuss your legal rights under California family law in a free half-hour attorney consultation.