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Dividing assets in divorce: Debt

On Behalf of | Jul 20, 2023 | Divorce

In California, a divorce can force a couple to face certain responsibilities like debt. Debts accumulated during the marriage have to be assigned and paid. Understanding what debts will be split, which have individual responsibilities assigned, and what problems might arise from outstanding debt.

Debt responsibility

Matters such as divorce drag a couple through years of accounting to determine which debts are individual and split. Loans that you signed and cosigned, such as a mortgage, car or cash loan are the responsibility of both spouses, and the court will decide who will pay what portion of the debt. Verbal agreements to assume the debt, if there was a split in the marriage, will not be upheld in court; it must be documented.

Debts that were accrued by one person like student loans, loans without a cosigner, and medical debt will be the individual’s responsibility. Having specific documentation in a notarized form that your spouse is responsible for the debt is acceptable in court to have your spouse responsible for those debts. Likewise, suppose there was a prenuptial agreement that the debt incurred during the marriage is the responsibility of you or your spouse. In that case, the debt will be transferred to the responsible party for payment.

Can outstanding debts create problems after divorce?

Outstanding debts that were accrued during your marriage may present unexpected complications. Outstanding debts, like credit card debt, can have a major impact on your lifestyle, including decreasing your credit score, impeding new purchases, and preventing services from being renewed due to lack of payment.

Using mediation services to split and resolve as many of these debts as possible may simplify the divorce process. Keeping track of financial responsibilities and debts before, during, and after marriage can assist in a smooth transition from single to married to divorced.