Everyone knows that dividing up property is integral to a divorce. Yet, in today's economy, the allocation of assets between splitting partners is often overshadowed by the division of the couple's debt.
California's community property scheme and debt division
Most divorcing couples, with the help of their lawyers, are able to come to a property settlement arrangement outside of court — but if common ground cannot be reached, a judge will impose binding terms. In all divorces, including those that are settled relatively amicably, the standards that judges use to guide their decisions underlie all aspects of negotiation.
As such, when it comes to debt in divorce, it is important to understand that California is a community property state. This means that the "community" (i.e., the entity that was the marital partnership) is responsible for all debts incurred during the marriage and prior to separation. Simply put, if your soon-to-be ex-spouse racked up debt while you were married, even if the borrowed money was spent purely on his or her own personal excesses, you could be on the hook for half.
Even if you negotiate divorce terms that assign responsibility for a debt to your former spouse, you should be wary of accounts that continue to bear both your names. No matter what your divorce decree says, your contract with a credit card issuer or some other creditor will stand as entered into unless some step is taken to modify it. For instance, if your divorce settlement states that your ex is to pay off a joint credit card, should he or she fail to make a payment, it could impact your credit and the credit card company might ultimately come after you.
Paying your former spouse's debts leave a bad taste in your mouth? Bankruptcy may be the answer.
Divorce can be a huge financial setback: not only will you lose the income contributions formerly provided by your spouse, but you will also be maintaining a separate household and absorbing all associated costs. Add the challenge of paying for half of a spendthrift former partner's debts, and your situation can quickly become overwhelming.
Thousands of individuals and families are devastated by the financial realities of divorce every year. But, many of them find a solution in bankruptcy. If the prospect of paying off your former spouse's debts is less than appealing, bankruptcy can help you wipe the slate clean and get a fresh financial start.
If you are facing divorce and financial challenges, don't let your former partner's spending habits continue to drag you down. Contact a bankruptcy attorney today.