Debt-related pressures can degrade a relationship and even lead to or speed up separation. But what if you maintained a balanced budget, but your wife failed to do so? What if she spent beyond her means, racking up thousands in credit card bills and other obligations without your consent or knowledge? What if she developed a gambling problem or gave money or assets away to a friend or relative? How much of the debt that she incurred will be your responsibility? Here’s what California law generally says about how to handle these types of challenges.
Steps to Equitable Property and Debt Division
To divide both assets and debts during a California divorce, in general, you will need to take the following steps:
- List all of your assets and debts.
- Determine which assets constitute community property, and assign fair market value to each item.
- Itemize separate property.
- Use the Schedule of Assets and Debts, which you must legally share with your spouse or domestic partner when you end the marriage. You will need to list everything honestly. Hiding assets or debts during a divorce can result in serious penalties and complications to your case.
- Compare your schedule with your partner’s schedule so that you can resolve any differences.
- If you cannot resolve differences, a trial may be required to determine and enforce your obligations to one another.
Cautions When Dividing Debt
In some divorces, the individuals simply divide the debt in half. However, you generally do not want to take this approach, because a creditor (such as credit card company) can pursue either of you for the monies owed if the other party does not make the agreed-upon payments. They are not bound by your verbal agreement or divorce decree. You might end up paying the debt and paying interest and fees as well, which could damage your credit rating and throw off your personal budget.
Avoiding Conflicts During Asset Division
Speak with your attorney and financial advisor about steps to take to avoid being encumbered by marital debt after the separation. For instance, you might sell real property and then pay some of the debt, using the proceeds from the sale. Your wife could also open a new credit card in her name only and transfer the balance from the old card to the new credit card, so that she would now be fully responsible for the debt.
Abiding by the Marriage Settlement Agreement
If your ex will not abide by the court order and pay her debt as directed, the court can enforce it similar to any other bill. However, in order to do this, the credit card debt (or other debt) must be included in the judgment.
Financial mediation can help couples resolve their differences when it comes to debt and property division. Private mediators vary between $50 and $250 per hour, and the couple generally splits the fee.
If you have additional questions about the how to divide up assets and obligations fairly and strategically, a seasoned California divorce lawyer with the Law Offices of Silky Sahnan can help. We have lots of experience working with high net worth clients going through complex divorces. Call us at 888-228-1098 for a private consultation.