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Take care when dividing debt in a California divorce

When a couple in California divorces, they may be concerned about who gets to keep the family home, furniture, electronics, and automobiles. What they may not initially consider, however, is that it’s not just their assets that are divided in their divorce — their debts must be divided too. And, there are certain points couples should keep in mind when it comes to dividing debt in a divorce.

Some couples may think that dividing debt is relatively simple — everyone gets one-half of it. So, for example, if a couple has a credit card balance that is the same amount as their auto loan, one party can take the auto loan while the other party takes the credit card debt. That way, everything is even.

However, things aren’t always so simple. Even if a couple’s agreement on how to split debt is made part of their divorce decree, if both of their names are still on a credit card account or auto loan, then they are both responsible for the debt. That means that, despite what a divorce decree says, if one spouse takes on credit card debt during a marriage and fails to pay it, the credit card company can seek payments from the other spouse whose name is still on the account even if the parties are divorced.

There are ways to avoid this outcome. Some couples choose to sell assets, such as a house, and instead of splitting the proceeds they funnel those funds into paying off debt. Another option is for the spouse that takes on the jointly-held debt to transfer the debt from the jointly-held line of credit to a new line of credit that is opened after the divorce and that is in their name only.

As this shows, care needs to be taken when dividing debt in a divorce. A divorce decree alone cannot absolve a spouse of their responsibility towards a jointly-held debt. Dividing debt is an important part of the property division process, so California spouses who are in the process of dividing their assets and debts should make sure they take the steps necessary to completely and adequately address any marital debt.

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Joseph R. Zoucha, Attorney & Counselor at Law
520 Warren Street
Redwood City, CA 94063

Phone: 650-381-9591
Fax: 650-261-9650
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