Back to Blog Page

Dealing With Debt During Divorce: Strategies to Keep Your Finances on Track

Divorce is a challenging process, and when financial matters come into play, it becomes even more complex. One of the most pressing issues divorcing couples face is the division of marital debt. Understanding how marital debt is divided in California and employing strategies to manage financial obligations can ease the transition and set the stage for a stable post-divorce financial future.

How Marital Debt Is Divided in California

California is a community property state, meaning that all debts and assets acquired during the marriage are considered jointly owned. This principle applies regardless of which spouse incurred the debt or whose name is on the account. During a divorce, these debts and assets are typically divided equally between the spouses.

When dividing marital debt, the court considers several factors:

  1. Type of Debt: Whether the loan was for a necessary expense benefiting both spouses or for an individual’s personal use.
  2. Ability to Pay: Each spouse’s financial situation and ability to repay the debt.
  3. Fraudulent Behavior: If one spouse incurred debt through fraudulent activities or without the other’s knowledge, the court might allocate that loan solely to the responsible party.

Debts and assets acquired before the marriage or after the separation date are considered separate property. These are not subject to division and remain with the individual who incurred them. Additionally, any gifts or inheritances received by one spouse during the marriage are generally considered separate property.

5 Strategies to Manage Financial Obligations

If you have debts concerning you during your divorce, there are several strategies you can use to manage them:

1. Inventory All Debts

Create a comprehensive list of all debts, including mortgages, credit card balances, auto loans, student loans, and any other financial obligations. This inventory helps provide a clear picture of the financial landscape and facilitates equitable division.

2. Close Joint Accounts

To prevent further accumulation of debt and reduce financial entanglements, close all joint accounts. This step ensures that neither spouse can increase the financial burden post-separation.

3. Negotiate Responsibility

Negotiate with your spouse to determine who will take responsibility for specific debts. Aim for a fair division that reflects each party’s ability to pay and the benefit received from the incurred debt.

4. Consider Refinancing

Refinancing debts into individual accounts can simplify the repayment process. For instance, if you are responsible for the mortgage, refinance it solely in your name. This step not only clarifies responsibility but also helps in rebuilding individual credit post-divorce.

5. Protect Your Credit

Monitor your credit report regularly to ensure that joint debts are being paid on time. Late payments can negatively impact your credit score, making it harder to secure loans or credit in the future. Additionally, consider placing a credit freeze to prevent unauthorized borrowing.

Strategic Guidance for Divorce Debt Division

Dealing with debt during a divorce in California requires careful planning and strategic decision-making. By understanding how marital debt is divided and implementing strategies to manage financial obligations, you can minimize financial stress and pave the way for a secure financial future. Joseph Zoucha, Attorney & Counselor at Law, is dedicated to guiding clients through the intricacies of divorce, ensuring that their rights and interests are protected every step of the way.

Back to Blog Page