Each state has its own laws and procedures for dividing marital property and debt, so if you’re getting a divorce in California, it’s important to understand how California handles asset and debt division in these matters.
Property and debt division in a divorce are so complicated and the cost of making the wrong move is so high that you should have a consultation with a divorce lawyer before you file the divorce papers, especially if you have any measurable assets or significant debt. In this article, we discuss asset and debt division in a California divorce and what happens when California couples decide to dissolve their marriage.
Did you sign a prenuptial agreement? If you signed a prenuptial or a postnuptial agreement before or during your marriage, we urge you to contact an attorney at our firm to discuss your case before you file for divorce.
What is Property?
The first thing you want to do is understand what the family courts count as property under California law. The California Courts describe property as “anything that can be bought or sold.” Property also refers to anything that has value. Examples of property include:
- A home
- Automobiles
- Clothing
- Furniture
- ATVs
- Boats
- Motorcycles
- RVs
- Cash in bank accounts
- Retirement accounts
- Stocks
- Land
- Real estate
- Pensions
- Security deposits on rental homes or apartments
- Life insurance with cash value
- A business or patent
When you get a divorce in California, the court will make decisions about how to divide any property that you and your spouse acquired during your marriage. Even if you want to avoid these issues or if you already dealt with this issue informally at the time you two split, the court still has to issue a formal order about asset and debt division.
“Does this mean I have to go to a judge and have him or her decide on these issues?” The good news is that you don’t necessarily have to let a judge decide for you. In most cases, a couple will agree on how to divide their property and debts and before they can get divorced, the judge will review their agreement and sign off on it. Until this occurs, all property earned or acquired during your marriage legally belongs to you both, regardless of who is using it or controlling it.
Debts Are Treated the Same
We mentioned above how everything you and your spouse obtained during the marriage belongs to you both, but the same can be said about your debt. If you and your spouse divide your debts based on an oral, casual, or informal agreement and you do not have a court order (the judge has not signed off on your agreement), then you both own the debt and you’re both responsible for it, even if you two decided to split it through an informal arrangement.
Community vs. Separate Property in a CA Divorce
When you go through the divorce process, it’s absolutely vital that you understand California’s property laws as they pertain to a divorce. California is one of a handful of states that is a “community property” state.
Under California’s community property laws, all property acquired during a marriage is technically “community property,” which means it belongs to both of you, regardless of who earned it or whose name is on the title – except property that was a gift to one spouse or an inheritance bequeathed to one spouse. And any debt that a married couple acquired during the marriage is community debt, which means both spouses are liable for community debt, regardless of which spouse racked up the debt.
“What if my spouse maxed out a credit card and I had no involvement?” Even if the credit card was in your spouse’s name alone, if the debt was acquired during the marriage, you are still responsible for it. However, if it can be proven that your spouse spent the money out of spite or revenge in anticipation of divorce, it is possible for a judge to consider it a “wasteful dissipation of marital assets.” In such cases, the innocent spouse may not be held liable for the debt.
“In California, each spouse or partner owns one-half of the community property. And, each spouse or partner is responsible for one-half of the debt. Community property and community debts are usually divided equally,” according to the California Courts.
Separate Property is Not Divided in Divorce
Only community property is divided in a California divorce; separate property remains separate and is not divided. So, what counts as separate property? Separate property includes property owned by one spouse before the marriage, gifts and inheritances. If you buy property with separate property, that is also separate property.
For example, if you receive an inheritance from your uncle while you’re married and you buy a boat with the money from the inheritance, the boat remains yours because it is separate property. Separate property also includes all money you acquire after the date you become separated, and this includes the money you earn. Because of this, the date of separate is very important in a California divorce. So, if you foresee a bonus or a raise in the near future, it may be wise to separate sooner than later so that raise or bonus is counted as separate property.
Note: Separate property only belongs to you, it does not belong to your spouse as long as you take steps to keep it separate. Our advice is to keep it in a separate bank account that only has your name on the account. Debts can count as separate property as well when they are acquired after the date of separation.
Next: How Can I Protect My Assets in a California Divorce?
We hope this article helped you better understand asset and debt division in a California divorce. To meet with a member of our legal team for free, contact us today.