California is a community prop state, which means in a divorce, the court assumes each spouse has equal ownership of all assets and all debts. Business Insider reported the average American debt is over $59,500.
Many couples will have to navigate how to divide debt when they end their marriages. It is essential to address financial obligations and debts accumulated during the union fairly and equitably.
Identify and list all debts
The first step is for the couple to create a comprehensive list of all debts they incurred during the marriage. This includes mortgages, car loans, credit card balances, personal loans and any other outstanding financial obligations. Open and honest communication is important at this stage to ensure they do not overlook anything.
Understand separate vs. marital debts
Separate debts are typically those incurred before the marriage or after separation, and they are usually the responsibility of the individual who incurred them. Marital debts, on the other hand, are those acquired during the marriage and are subject to division.
Negotiate and reach an agreement
In many cases, couples can negotiate a debt division agreement through mediation or with the assistance of their respective legal advisors. This approach allows for greater flexibility and control over the division process.
The couple will have to determine who is responsible for each debt. In some cases, the responsibility may be straightforward, such as when a debt is solely in one spouse’s name. However, many debts may be joint, making it necessary to establish a fair allocation of responsibility.
If a couple cannot divide their debts, the court will step in to do it, and that will happen according to community property laws. By addressing debt division with a clear and cooperative mindset, couples can minimize stress and set the stage for a more stable financial future post-divorce.