community property and it's affect on debt

How Is Debt Divided During Divorce?

Goldberg Jones Divorce, Finances Leave a Comment

As family law practitioners and divorce lawyers, we hear a number of questions repeatedly. One common thing our clients want to know is: ‘who’s responsible for debt in divorce their ex ran it up’?

We got this question from a San Diego husband and father a while back:

“Am I responsible for my wife’s unscrupulous spending and credit card and loan debts that are in her name?”

The short answer, and the one you probably don’t want to hear, is that you likely will be. Here’s why.

Who’s Responsible For Debt During Divorce?

Unfortunately, the court doesn’t focus on the name on the card. Instead, it treats both spouse’s spending as a single community. If your ex ran up a bunch of bills or took out loans before you separated, even if you had no idea, there aren’t many options and you’ll probably wind up on the hook for at least some of that liability.

Why you might ask? Because California is a community property state. The courts use a particular standard when splitting up assets, and debts, during the division of property. Under these statutes, the court views most property and liabilities acquired during a marriage as belonging jointly to both parties.

This doesn’t include things like gifts or inheritances. Nor does it mean you split everything down the middle, but it’s the starting point. To determine the final amount, the courts consider need, income, financial prospects, and many other factors. Ideally, both parties wind up on relatively equal footing and able to maintain a lifestyle similar to that enjoyed during marriage.

Not only does this include assets and property, but the same strategy also applies to debt.

Separate Debt Exceptions

As with most rules, there are exceptions. The California Family Code makes certain allowances for extraneous spending. Section 2625 states:

“[A]ll separate debts, including those debts incurred by a spouse during marriage and before the date of separation that were not incurred for the benefit of the community, shall be confirmed without offset to the spouse who incurred the debt.”

What this means is that if you can show your ex’s spending was frivolous and not for the “benefit of the community,” you may not wind up responsible.

That said, while from a legal perspective this may be the case, things don’t always go this way in practice. Proving this definitively can be difficult; it’s a hard fight to win.

If you argue a spa day or new clothes are unnecessary and don’t benefit the marriage, she may say that mental health and appearance go hand in hand and are important considerations to the community.

The ultimate decision falls to the court. However, unless your ex embarked on an epic spree of obvious revenge spending, the debt will likely be divvied up between both of you.

Related Reading: We Got Divorced, Why am I Still on the Hook for the Home Loan?

Timing of Debt

The timing of debt is important. If your ex racked up insane credit card bills before you were married, those stay hers. This also goes for student loans, car payments, and other obligations built up prior to marriage.

According to Family Code section 2621:

“Debts incurred by either spouse before the date of marriage shall be confirmed without offset to the spouse who incurred the debt.”

Related Reading: A Gift or Inheritance and Why that Matters

Date of Separation

If your ex had debt before marriage, that stays hers after divorce. Similarly, if your ex builds up a ton of debt after the separation, that’s also her burden to bear. This is a bit trickier and is where the date of separation comes into play.

Once the date of separation is established, that’s it. From that point forward, all income, pensions, retirement benefits, or other assets, or debts, fall to the individual who earned or accrued them.

This looks simple on the surface, but for a long time, it was muddy and vague. For instance, if you were divorcing, but still lived in the same house with your ex for financial reasons or for the kids, that often wouldn’t count. In that scenario, if your ex ran up credit card bills or got a car loan, you might still be liable.

Essentially, you had to live “separate and apart.” However, that changed a few years ago.

Related Reading: How Date of Separation Impacts Divorce

New Legislation

State Bill 1255 went into effect on January 1, 2017, and changed the way California establishes the date of separation. Moving forward, the date of separation happens when one spouse states his or her intention to divorce.

The key part of this is:

“[T]he conduct of the spouse is consistent with his or her intent to end the marriage.”

In short, you have to act like you’re getting divorced. Though you can still live together, you must proceed as if you’re ending the marriage. You can’t act like you’re married; no holding hands or going on dates. Also, you can’t make efforts to save the marriage, like counseling or therapy. This is the date it’s over, it’s a line in the sand.

A potential hiccup with this new law is when spouses don’t agree on the date of separation. It’s one thing when one of you officially files for divorce. Then there’s an obvious, hard and fast date. Before filing the forms, however, it can appear less definite. Or if your ex claims your behavior was inconsistent with wanting a divorce—perhaps you acted more married than your words indicated.

This can muddy the waters again and may impact the divorce process. It’s a disagreement that you must settle.

Related Reading: During Legal Separation are You Responsible for Your Ex’s Debt?

Am I Liable for My Ex’s Debt?

So, as usual, the answer to the question of the day is: It’s complicated. It depends on the circumstances and a number of factors. But in general, if the debt was accrued during the marriage, you’ll probably have to pay at least some of it.

If it’s from before, that stays with your ex. The same goes for debt built up after the date of separation. So you shouldn’t be on the hook for the post-separation trip to Vegas.

Related Reading: 5 Scary Divorce Facts You Should Know

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