Call us now ! Send us an email 10th St Sacramento United States

Back to Top

Debt Division During Divorce: What You Need to Know

Female Signing Contract
When you get a divorce, one of the most important components is the division of your assets. Not only does this include your money and property but also debt. Debt is one of the most important things you have to factor into your settlement. Read on for some helpful information about debt division during divorce.

How Is Debt Divided in a Divorce?

A debt divides in the same way assets are divided. In a community property state, which includes California, all property you accumulate in a marriage divides equally between both partners. This will include the debt you acquired in the marriage, as it belongs to you both in an equal fashion.

You may question whether or not you will be responsible for debt that is not in your name. As a general rule, you will have to take on one-half of the debt if you accumulate the debt in your marriage, whether or not the debt is in your name.

For instance, if your spouse took a $50,000 loan to make repairs to your home during your marriage, legally you will have to pay one half of the balance of the loan after you divorce even if the loan is not in your name.

If you or your spouse acquires debt before marriage, it will stay with the person who accumulated it. The same stands for property. For instance, if you live in a home your spouse owned before you were married, the home will belong to your spouse.

How Is Community Property Divided?

The point of community property is a fair and equitable division of assets. The goal is to put you both in an even position with regard to your assets and debts after a marriage. However, there are some exceptions.

You may be able to avoid repaying debt if you can prove your spouse took the debt while you did not benefit within the marriage. Your attorney will have to argue the fact you should not pay for the debt because it is not fair and equitable to do so. If the judge agrees, you will not have to pay that portion of debt, and it will remain with your spouse.

How Is the Mortgage Debt Handled?

If you own a home, chances are you have mortgage debt. A mortgage is a debt that is secured by an asset. If you both own the home and the mortgage is in both your names, you have several options to consider.

One of you can opt to keep the house. If you choose to go this route, the spouse who keeps the home will have to approach the lender to have the house refinanced in his or her name only.

However, you need to consider equity. If you have any equity in your home, the equity is an asset you will have to divide. You can approach this division in different ways. One option is to simply pay your spouse one-half of the equity amount.

If you do not have cash on hand to pay your spouse, you can refinance the home for its current value and pay your spouse with the money you have left over after you pay your current mortgage off.

You could also obtain a home equity loan in the amount of your home's equity. You can then use some of the residual cash to pay your spouse off for his or her half of the home's value.

If you do not want to bother with any of this, you can also simply sell the home and split the remaining equity, if there is any. If you are upside down in your home, you will both equally have to pay the lender whatever is remaining of the mortgage at the time of payoff.
Debt and asset division is one of the most difficult parts of divorce. If you need help with your divorce, please contact the Law Office of Richard Eldridge

Law Office of Richard Eldridge
Certified Family Law Specialist*

615 10th St.
Sacramento, CA 95814

Free Parking is Available

Phone: 916-447-7425


Business Hours:

Pay-As-You-Go Option is Available