The laws governing the distribution of assets and debts (property) pursuant to a California divorce can be found in the California Family Law Code, Rules of Court, local court rules, and various cases that have been used to interpret these codes and rules.
The purpose of this article is to give you a general understanding of the laws and procedures regarding the division of debt when you divorce or legally separate in California.
Types Of Property in a California Divorce
In all divorces or legal separation cases, the couple’s assets and debts (property) must be characterized and then divided between the parties. In California, property can be either community, separate, or a combination of the two (quasi-community property).
California is a community property state, meaning that any property acquired by either spouse during the course of the marriage is presumed to be community property––equally owned or owed both spouses.
Separate property is any property acquired by either spouse before the marriage, after separation, or that was acquired by gift or inheritance. Furthermore, anything that is produced by separate property during the course of the marriage, such as interest and dividends accrued on an account that is separate property, will be considered separate property as well.
Quasi-community property is any property acquired by either spouse while living outside of the state of California that would have been considered community property if acquired while living in California. Quasi-community property is also subject to division in accordance with California community property laws during a divorce in California.
The Division of Property in a California Divorce
In the absence of an agreement between the parties as to how their property is to be divided, the court must divide the total community estate so that the net division is equal between the parties. This is accomplished by adding the assets and debts, dividing them as equally as possible, and then ordering one party to pay the other an equalizing payment so that the net division of property is equal.
Where possible, the court may order an “in kind” division of property. This means that each party will receive one-half of the community portion of each item of property. Some assets, however, cannot be divided in kind. When this is the case, the court has the authority to order the assets to be sold and the proceeds divided between the parties.
Exceptions to these rules exist for items such as student loans, support payments from previous relationships, workers’ compensation awards, and personal injury awards. Furthermore, if the net value of community property is less than $5000 and one party has not participated in the divorce or cannot be located, the court may award the entire estate to the other party.
How Debts Are Assigned in a California divorce
In California, debts are generally handled in the same manner as are assets and will be assigned in accordance with California community property laws. However, exceptions to this rule exist for certain types of debt, such as:
- Student Loans;
- Support Payments from previous relationships;
- Criminal fines and restitution; and
- Business debts
Student loans are assigned in accordance with a special rule pursuant to Family Code Section 2641. As a rule, the spouse who obtained the education will carry the student loan debt with them after the divorce or legal separation, unless the community has substantially benefitted from the education prior to separation. Similarly, the court may also order the party who received the education to reimburse the community for contributions made to his or her education or training if the community did not substantially benefit from the education or training.
Support Payments from Previous Relationships
Child support and spousal support owed due to previous relationships will also be assigned in their entirety to the party who owes the support.
Criminal Fines and Restitution
Certain debts that were incurred during the course of the marriage, but to the detriment of the community, such as criminal fines and restitution, will be entirely assigned to the party who incurred the debt.
Business debt can be difficult to value. If the business is partly community property and partly separate property, the situation becomes even more complicated because it can be extremely difficult to say which portion of the business debt was attributable to community efforts and which to separate efforts. Therefore, there are many different methods used to value business debt and assign them equitably.
Contact an Experienced San Joaquin County, California Family Law Attorney
If you are facing a divorce or legal separation in San Joaquin County, California, contact an experienced San Joaquin County Family Law Attorney who can review the circumstances of your case, and help you successfully negotiate and navigate through the division of your debts. Attorney, Anna Y. Maples, of Maples Family Law can help you with the division of the debts you acquired during the course of your marriage, allowing you the peace of mind to move on with your life post divorce.