What Happens to Spousal & Communal Debt During a Divorce?

Property division is one of the most talked-about subjects of divorce law. Couples going through a dissolution of marriage wonder how the courts will split their hard-earned income and assets. They may also wonder what happens to the couple’s debts. The courts in California deal with spousal and communal debt during a divorce using the community property rule.

Am I Responsible for My Spouse’s Debt Accrued During Marriage in California?

Yes, you may become responsible for the debt your spouse accrued during your marriage, as California is one of nine community property states. Any debt your spouse accrued while married will automatically become part of community property, meaning you both share the marital debt equally, even if only one of you or responsible for actually acquiring the debt.

The community property rule applies to both assets and joint debts during a divorce. Under this rule, the courts view a married couple as their own community. Within this community, both parties own equal shares of all marital property acquired (California Family Code Section 2550). They also own equal shares of the marital debt acquired.

In California, if a divorce case goes to court, the goal is to achieve as equal a division as possible – ideally, a 50/50 split between both spouses. In other words, you may receive 50% of your spouse’s debt as part of your marital property division order. There are a few exceptions to the rule, however, that may allow you to avoid accruing your spouse’s debt.

What If My Spouse Declared Bankruptcy?

If your spouse does not have enough income to keep up with payments for debts as well as fulfill other financial obligations, he or she may declare bankruptcy. Unfortunately, if your spouse files bankruptcy, it will not protect you from a share of his or her debts unless you file as well. In fact, your situation could get worse.

Your spouse declaring bankruptcy will not erase his or her debts. Instead, it simply erases the filing party’s liability for paying the debts. If you do not file bankruptcy as well, the creditor will have the legal right to seek payment for the remaining debts from you as the remaining debtor. If your spouse files bankruptcy, therefore, it may be in your best interest to also declare bankruptcy. A lawyer can help you make this decision.

How to Protect Yourself From Being Responsible for Your Spouse’s Debt

If you and your spouse created a prenuptial or postnuptial agreement deciding how you would divide assets and debt in the event of a divorce, this agreement will take precedence over a court order. A judge will enforce the stipulations of the prenuptial agreement, including how you and your spouse agreed to divide debts accrued during the marriage, as long as the document is legally valid.

Another exception is if the value of one spouse’s debts exceeds the total value of the community’s assets. In this scenario, the courts may assign an unequal amount of debt to one spouse to make things more equitable. The spouse who is in a better financial state would receive a lesser portion of the debt in this case.

Finally, you may be able to avoid absorbing your spouse’s debts in a divorce if you organize them as separate property during your marriage. Although the courts have the power to divide community debt, they cannot control separate debt in a divorce decree. Separate debt will remain with the person who accrued the debt after a divorce. Separate debt includes debt incurred before marriage and after the date of separation.

How a Divorce Attorney in San Diego Can Help

A divorce attorney in San Diego can protect you as much as possible from absorbing spousal debt from the very beginning of your divorce case. A lawyer can offer legal help and brings experience to help you work through complicated legal matters such as community vs. separate property, the division of communal debt and what to do if your spouse declares bankruptcy. Contact an attorney as soon as possible during your divorce case for assistance.