29 Apr Dividing the debt on divorce in California
Kathy Kristof’s recent feature on protecting yourself from the debt of a failed marriage addressed well the problem of joint debts. Where the creditor can pursue either party for payment, informal divisions of the debt that don’t involve the creditor have risks to the other spouse. If, despite your agreement, your ex doesn’t pay, your credit takes a hit.
It’s a common misconception that California’s community property system of marital property makes both spouses personally liable for the community debts. Not so. The community property is liable for the debts of either spouse. But a creditor with a community claim can collect from 1) the person who incurred the debt and 2) from the community property. The spouse who did not incur the debt is not liable for that debt after the marriage, unless a family law judge orders it.
Often these days, the community claims stand lop sidedly in the name of just one spouse. So, although the debt is a debt of the marriage, the spouse whose name is not on the credit card has no personal exposure to the creditor.
Under California’s Family Code, a judgment of divorce can create personal liability in one spouse where none existed before to achieve an equal division of the debts. That liability can be enforced by the creditor, even if the creditor was not joined as a party to the divorce.
So, if you are splitting the sheets, consider how to split the plastic so the debt burden is fairly divided as well. Agreements between the former spouses don’t bind the creditor.
Cathy Moran, Esq.
Latest posts by Cathy Moran, Esq. (see all)
- Can You Afford The Cost Of Waiting? - November 10, 2013
- Lost IQ: The True Cost Of Just Paying The Credit Card Minimum - October 10, 2013
- Getting Rid Of Tax Liens After Bankruptcy - September 10, 2013
- Why The Information You Give Your Bankruptcy Lawyer Has A Sell-By Date - August 27, 2013
- Super Heroes Fight Debt - August 10, 2013