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How is debt divided during a divorce?

On Behalf of | Sep 17, 2021 | Property Division

If you or your spouse incurred debt before or during your marriage, you might not know what happens with that debt after you divorce. It can be a complex issue in California, but knowing what to expect may make things easier.

What should you know about dividing marital debt?

In California, you follow the community property law for division of property and debt. The three types of property include the following:

  • Community property: Community property relates to property and debts that were acquired during the marriage but before the couple separated.
  • Separate property: Separate property is anything that was owned by each spouse before the marriage, property and debt each spouse incurred after separating, gifts given to one spouse during the marriage, any property and debt incurred by one party that is only in their name, and property and debt that each spouse agreed would stay separate.
  • Quasi-community property: This is property that one or both spouses earned when they lived in a different state that would be considered community property in California.

How is debt shared in California?

Property and debts that come in during a marriage in California are equally shared between spouses. As California follows the community property division, it means that when the couple divorces, assets and debts are shared 50/50. In terms of debt, it doesn’t matter if one spouse incurred the debt. Both share the responsibility of that debt as long as one spouse incurred it during the marriage.

What are the different types of debt and who’s liable for it?

Liability for debt during a divorce will depend on the type of debt incurred. There are three types of debt:

  • Contract: This is debt acquired through contract agreements such as auto loans, mortgages and other loans. Both spouses can be held liable for this type of debt.
  • Tort: This debt is assigned due to negligence or deliberate harm such as from a car accident. If the activity leading to the debt was not to benefit the community, only the at-fault spouse is held liable.
  • Statute: This is debt incurred from the state and includes things like spousal and child support or taxes. Both spouses are held liable for tax debt.

Debt can be complicated during a divorce. You should make sure you know what types of debt are present and what debt might affect you even after the divorce is finalized.