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Dividing outstanding debts during a divorce in California

On Behalf of | Sep 13, 2021 | Divorce Mediation, High Asset Divorce |

Regardless of their income levels, financial issues reflected a significant cause of concern for 64% of the adults surveyed for the American Psychological Association’s 2020 “Stress in America” study. As reported by the AARP, a top contender for long-term marital problems includes conflicting money management perspectives.

When one spouse is a saver and the other a spender, tensions may develop. The saver may view the spender as “wasteful.” If instead of curtailing spending, the spender increases his or her consumer purchases, the relationship may suffer and lead to divorce.

Buying on credit may hold both spouses liable

Because California is a community property state, debts incurred during a marriage generally divide equally between both spouses. As noted by Bankrate.com, community debt includes purchases that benefited a marital household. Each spouse may have the liability to pay half of the bills for purchases made with credit cards and personal loans even if an account only lists one spouse as its owner.

Contesting a spouse’s debts

Receipts for items purchased after a couple separated may prove a spouse did not incur the debt while part of a marital household. In situations in which a spouse hid purchases or bought items unrelated to the household and prior to separation, the other spouse may contest his or her liability to pay half. Creditors, however, may still hold both parties on a joint account liable for unpaid balances.

When both spouses agree to classify specific accounts as separate property, each individual may have 100% liability for their personal balances only. After spouses separate, an individual will typically have liability only for those debts he or she incurred after leaving the household.

Significant differences in how each spouse handles money may cause irreparable damage to a marriage. Dividing community property during a divorce may include “trading” ownership of shared assets for outstanding debts.