Dividing Property & Debt in a California Divorce

Each state has its own rules and procedures for distributing marital property and debt, so if you’re getting divorced in California, you should know how the state handles asset and debt distribution.

The allocation of property and debt in a divorce is so intricate, and the risk of making the wrong decision is so high, that you should consult with a divorce lawyer before filing the divorce papers, especially if you have any measurable assets or considerable debt. In this post, we’ll look at how assets and debts are divided in a California divorce, as well as what happens when a California couple decides to divorce.

Have you signed a prenuptial agreement?

If you signed a prenuptial or postnuptial agreement before or during your marriage, we strongly advise you to consult with one of our attorneys before filing for divorce.

What is the definition of property?

The first step is to learn what the family courts consider to be property under California law. Property is defined by the California courts as “everything that can be bought or sold.” Anything with worth is also referred to as property. Here are some examples of property:

• A house
• Vehicles
• Clothing
• Furniture
• ATV’s
• Boats
• Motorcycles
• RV’s
• Cash in bank accounts
• Retirement accounts
• Stocks
• Land
• Real estate
• Pensions
• Security deposits on rental homes/apartments
• Life insurance with cash value
• A business or patent

When you and your spouse get divorced in California, the court will decide how to distribute any property you and your spouse accumulated during your marriage. Even if you desire to avoid these concerns or if you dealt with them informally when you two divorced, the court must nonetheless issue a formal order dividing assets and debts. 

“Does this mean I have to take these matters to a judge and have them decide?” The good news is that you don’t have to allow a court make your decision for you. In most circumstances, a couple will agree on how to divide their property and debts, and the court will review and sign off on their agreement before they can get divorced.

Until this happens, any property earned or acquired during your marriage is legally owned by both of you, regardless of who uses or controls it.

Debts are dealt with in the same way.

Everything you and your spouse acquired throughout your marriage belongs to both of you, as we discussed earlier, and the same can be said about your debt.

If you and your spouse share your debts based on an oral, casual, or informal agreement and you don’t have a court order (the judge hasn’t signed off on your agreement), you and your spouse are equally responsible for the debt.

Community Property vs. Separate Property in a California Divorce

It’s critical to grasp California’s property rules as they apply to divorce when going through the divorce process. California is one of only a few states that recognizes “common property.”

All property obtained during a marriage in California is officially “community property,” which means it belongs to both of you, regardless of who earned it or whose name is on the title — with the exception of property given to one spouse or an inheritance left to one spouse. And any debt incurred by a married pair during their marriage is considered community debt, which means that both spouses are responsible for the obligation, regardless of who incurred it.

“What if my spouse used up all of our credit cards without my knowledge?” Even if the credit card was only in your spouse’s name, you are still liable for the debt if it was incurred during the marriage. A judge may deem it a “wasteful dissipation of marital assets” if it can be proven that your spouse squandered the money out of anger or retribution in anticipation of divorce. In such instances, the debt may not be held against the innocent spouse.

“Each spouse or partner owns one-half of the community property in California. In addition, each spouse or partner is liable for half of the debt. According to the California Courts, “shared property and communal debts are normally distributed equally.”

Divorce does not divide separate property.

In a California divorce, only community property is shared; separate property remains separate and is not divided. So, what exactly constitutes independent property? Property owned by one spouse prior to the marriage, gifts, and inheritances are all examples of separate property. It’s also separate property if you buy a house with separate property.

For instance, if you receive an inheritance from your uncle while married and use the money to buy a boat, the boat stays yours because it is separate property. All money you obtain after the date you separate, including money you earn, is considered separate property. As a result, in a California divorce, the date of separation is crucial.

If you expect a bonus or a raise in the near future, it’s a good idea to separate sooner rather than later so that the bonus or raise is counted as distinct property.

Separate property is yours alone; it does not belong to your husband or wife as long as you take steps to preserve it that way. Our recommendation is to maintain it in a separate bank account with only your name on it. When debts are acquired after the date of separation, they can be considered separate property.

For a more detailed assessment of your specific circumstances, call the highly skilled California family law attorneys at Spodek Law Group for your free, confidential consultation right away.