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Handling credit card debt during a California divorce
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Handling credit card debt during a California divorce

On Behalf of | Dec 20, 2023 | Property Division

Couples preparing for divorce in San Diego often have many practical matters to address. Separating their finances can be one of the biggest challenges. Many couples focus on their major assets, like their homes and retirement accounts.

They may fail to acknowledge how big of an impact their debts could have on the marital estate. The property division process in California divorce requires that people filing litigated divorces address not just the valuable resources that they share with their spouse but also the financial obligations they have accumulated during the marriage.

How can spouses address debts during divorce proceedings?

Determine what is marital and what is not

As with property, one of the most important considerations when dividing debt is whether a specific financial obligation is the responsibility of one spouse or the couple. Even debts solely in the name of one spouse could be the responsibility of both if they took on that debt during the marriage. Student loans and credit cards belonging to one spouse could be part of the marital estate for the purpose of property division.

There are certain debts, however, that may not be part of the marital estate. If one spouse engaged in financial infidelity by lying about their spending habits and taking on secret debt, those debts may not be part of the marital estate. If one spouse could reasonably claim that the debt was due to dissipation, either because of wasteful spending or an extramarital affair, they may be able to exclude that account from the marital estate.

Determine how to split or pay the debts

There are many different ways for California couples to handle marital debts when negotiating a property division settlement. One spouse could take responsibility for the debts to balance out taking more marital property. Of course, that approach can leave the other spouse vulnerable to future collection activity.

Other times, each spouse may accept responsibility for certain debts. Couples may also decide to use marital resources to pay their debts in full so that there aren’t any outstanding shared obligations after they divorce. If couples cannot reach their own settlement, then they may have to ask a judge to divide their property. Judges can apply the community property statute and divide both assets and debts according to their interpretation of marital circumstances.

Knowing what may happen with debts during a California divorce may help people set realistic goals for the property division process. Seeking legal guidance is a good way to secure personalized feedback in this regard.