No one wants to consider the debt consequences of divorce, yet at the same time, there are so many misconceptions about how it works. Here's what you need to know.

Marital Debt is Community Debt

Not all states have the same laws, but here in California, it is considered a community property state. What that means is that all property, assets, and debts acquired while you are married belong to both of you equally.

It doesn’t matter if the wife racks up $25,000 in debt in wardrobe costs on her own credit card, or if the husband buys an expensive car with a loan from his own bank. If the debts were incurred during the marriage, it’s all community debt, for which you are one-half responsible.

The only debt that is not community debt is the debt you incur before marriage, or after separation. If you are separated, but not yet divorced, then the new debts you acquire are your own and are not shared.

Why the Date of Your Separation is Important

Let’s say you finally have the big fight, and you declare that the marriage is over and you want to divorce. You leave your spouse and live elsewhere, but you are not yet divorced. From this point on, the new debts you incur are not shared, and neither is post-separation income.

You do not need to be legally separated to have a “date of separation.” Rather, the “date of separation” is the date on which either you or your spouse decided that the marriage was irrevocably broken and that it should be dissolved. Spouses can differ widely on when they believe that occurred.

Because the date of separation impacts when community debts stop accruing, the date is significant in many cases.

Mortgage Debt

Of course, the biggest debt most couples share is the mortgage they pay on the house. There are a few ways to settle this debt.

One way is to sell the house and divide the proceeds equally. In another common situation, if one spouse wants to continue to live in the house, then they can buy-out the home from the other spouse and renegotiate the terms (refinance) with the bank.

In rare instances, both spouses want to continue owning the home together even after they divorce. This can be worked out if both parties agree to continue paying their one-half of any and all house-related expenses.

Special Circumstances with Mortgages

During the transition period between separation and divorce, special circumstances may arise. For example, if you use money you earned after the separation to make payments on the home that you and your spouse own together, you could be entitled to reimbursement in California.

Conversely, if you stay in the home during this period, but the other spouse pays the mortgage, you may be held liable for one-half of the fair rental value of the property for the duration of your stay.

Enter the Prenup

An option for couples who wish to specifically define what is considered separate property and separate debt is the prenuptial agreement. If a legally binding prenuptial agreement spells out exact terms before the marriage, then any potential divorce proceeding must abide by those terms.

Remember, without a prenuptial agreement saying otherwise, all debts incurred after you are married are shared. This includes things like business debt, new education debt, and medical bills, to name a few.

Want to Know More About Debt and Divorce?

If you have questions about how to deal with debt and divorce, contact Park Family Law. Whether you need an experienced mediator to amicably and efficiently settle your case or an aggressive litigator to get you the best results in court, Park Family Law can assist you every step of the way.