When couples divorce, they often spend a lot of time and energy on how they will split up their assets. They often fail to spend an equivalent amount of time on how they want to handle the debt accrued during their marriage. However, that can have as significant of an impact on your financial future as your assets. In some cases, the debts may prove more substantial than the overall marital assets.
Familiarizing yourself with how the California courts handle debt in a divorce can assist you in making a more informed decision about how to handle the property division process.
You need a fair and relatively equal split of assets and debts
The main concern often involves a fair and reasonable outcome to the asset division process. Whether you and your ex try to set your own terms for an uncontested divorce or ask the court to rule on how to divide your assets, there are many different potential outcomes to dividing your debt.
For example, each spouse could wind up responsible for roughly half of the debt assumed during the marriage. Other times, one spouse could receive more of the marital assets but also more of the marital debt to balance that out. Debt could wind up allocated to one spouse in lieu of spousal support. Each family will have its own unique financial circumstances and that’s that will impact the safest way to divide the debt acquired in your marriage.
You may need to refinance some or all of your debt
Whether you have personal loans, a mortgage or credit cards, you likely share some of those lines of credit with your spouse. Any accounts that belong to both of you jointly need to get closed as part of the divorce. Sometimes, you need to pay the account off in full in order to terminate it. Other times, the institution involved may be willing to refinance the debt into only one spouse’s name.
Taking the time to close and refinance shared lines of credit and legally sort out the liability for debt is very important. Otherwise, if your spouse fails to pay their share, you could wind up with a diminished credit score. There are certain kinds of debt, like student loan debt, that may or may not wind up as part of your marital debt load, but that varies depending on your family circumstances.
It isn’t always easy to determine which debts need to get split up and which should remain the responsibility of only one spouse. Sitting down with a California divorce attorney can help you make better sense of your financial circumstances as you head toward divorce.