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How are Marital Debts Treated During Divorce?

All too often, people who are divorcing focus all their attention on the process of dividing marital community property and forget that they also need to be concerned about marital debt. It can be a bigger issue than property for some couples.

In California, there are some general rules about dividing debt in divorce, but it is not always clear how debts should be classified and treated. A skilled and knowledgeable attorney will understand how to pose persuasive arguments to demonstrate why a debt should be classified in a way that favors your interests, so this is an issue to consider when choosing the right divorce lawyer to handle your case. For instance, at Holstrom, Block & Parke, APLC, our team has considerable experience handling complex financial situations in divorce, so we know the most effective strategies to protect our clients’ interests when it comes to debt allocation.

Community vs. Separate

The starting point for division of debts in divorce is to determine whether an obligation is a community debt shared by both spouses or a separate debt that will remain the responsibility of one spouse. Generally, debt created during the marriage is marital debt and debt established before the marriage or after the date of separation is individual debt.

It is the timing that matters rather than the parties’ involvement in the debt. In other words, even if only one spouse incurred the debt, both spouses are responsible for it. If one spouse went on a secret spending spree and bought a bunch of stuff that the other spouse didn’t want, the other spouse is still jointly responsible for the debt if it was created before the date the parties separated.

However, if that spending spree occurred after the date of separation, then the debt should be treated as that spouse’s separate responsibility. So determining the specific date of separation can be critical.

Determining the Separation Date

The date of separation is so important, in fact, that sometimes it becomes necessary to hold a separate trial just to determine the official separation date. Under Section 70 of the California Family Code, the “date of separation” is “the date that a complete and final break in the marital relationship has occurred.” The statute further explains the fact that the marriage relationship has ended is demonstrated by two signs: one spouse “expressing” to the other that they want to end the marriage and the spouse who wants to end the marriage acting in a way that is consistent with ending the marriage.

Expressing a desire to end the marriage can be done through actions as well as words. If a spouse doesn’t specifically say “I want a divorce,” but that spouse moves and signs a lease on a new apartment, that can be taken as evidence that the spouse wanted the marriage relationship to end. But there are situations where spouses live separately with no intent to divorce, so evidence of this type is not always clear.

Evidence to show conduct demonstrating a continued intent to end the marriage can be even more ambiguous. Physical separation is a big part of the equation, but not as important as it used to be. A couple may continue to live in the same house but separately within that house. Establishing that a spouse has taken steps to separate finances such as opening an individual bank account and filing a separate tax return can go a long way toward establishing conduct consistent with the end of the marriage relationship.

When spouses express an intent to divorce but then later reconcile for a time before separating again, the determination of a separation date for the purpose the marital debt becomes even more complicated.

Community Debts May Be Divided Equally . . . Or They May Not Be

While debts established during the marriage are frequently divided equally as community debt, there are exceptions. If the spouses created a valid pre- or postnuptial agreement addressing debts, then the terms of that agreement will override any provisions of the law. Also, if the joint debts of the couple exceed the value of their joint assets, then the court could award a greater share of the debt to the spouse considered to be better financial shape.

There are other situations where a court might assign more debt to one spouse than the other, but it is also important to realize that even if a debt is assigned to one spouse, creditors may still try to collect from both spouses. The bottom line is that you need to work with an attorney who understands how to take every possible measure to protect your finances from debt liability.

Trust Holstrom, Block & Parke, APLC to Safeguard Your Finances in Divorce

Experience matters when it comes to complex divorce issues such as marital debt. The Certified Family Law Specialists and associates at Holstrom, Block & Parke have over 300 years of collective experience protecting the financial interests of divorcing spouses, and we are ready to put that experience to work for you. Schedule a confidential consultation today to learn more about the ways we can safeguard your future.

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