Overview of Dividing Debts Upon Dissolution of Marriage

Similar to the division of property, courts generally apportion debt according to the type of debt. For example, if the debt is classified as separate debt, that debt will be assigned to the spouse who incurred it. If the debt is incurred for the benefit of the community, it is classified as a community debt and is generally apportioned to each spouse equally. In a departure from the formulaic nature of the Family Code, the law allows the court discretion to apportion debts in a manor it deems appropriate if there is a situation where the community debts exceed the community assets.

Community Debts
Community debts are generally debts incurred during marriage for the benefit of the community. Community debts are normally divided equally between the spouses. Therefore, if at the time of dissolution the total community debt is $10,000 each spouse is liable for $5000 of that debt.

Although the code does not specifically list debts that benefit the community certain types of debt usually fall into this category. For example, purchases of ‘necessaries’ are usually deemed to benefit the community. A ‘necessary’ is a legal term of art that describes items essential to life. Common examples of necessaries are food, clothing, and shelter. Additionally, the law takes into account one’s station in life in determining if the purchase is a necessary or not.

For example, imagine that Wendy and Henry are wealthy. Wendy purchases a $500 pair of shoes. Shoes fall into the clothing category, which is a necessary, and because Henry and Wendy are wealthy a $500 pair of shoes fits with their station in life. Thus, this expense is a necessary and deemed a community expense so each spouse would have to pay this debt equally. In contrast, if Henry and Wendy are considered middle class that same $500 pair of shoes is a luxury item because $500 exceeds a reasonable amount to pay for shoes given their station in life. Therefore, it is not considered a necessary and would be confirmed as Wendy’s separate debt.

Similar to the division of property, courts generally apportion debt according to the type of debt. For example, if the debt is classified as separate debt, that debt will be assigned to the spouse who incurred it. If the debt is incurred for the benefit of the community, it is classified as a community debt and is generally apportioned to each spouse equally.If the total community debts exceed the total community assets the court has the ability to assign debt the debt as it sees fit. In assigning debt, the court will take into account the ability of a spouse to pay the debt. So if at the time of dissolution Henry and Wendy have debt $10,000 in excess of the community property the court will apportion that debt based on each spouse’s ability to pay. If, for example, Wendy is a homemaker, the court might apportion the entire $10,000 worth of debt to Henry. If both Henry and Wendy are employed the court might divide the debt equally between Henry and Wendy assuming their earning power is somewhat equal. In the alternative, if Wendy earns more than Henry, the court will apportion the debt accordingly. Although the court has discretion in to apportion debt as it sees fit, it must do so as fairly and evenly as possible to accomplish the equal division goals of The Code.

Separate Property Debts
To determine if their client’s debt is a separate 債務重組  debt or a community property debt lawyers will generally look at when the debt occurred. Liabilities that occur before marriage, after a judgment of legal separation, or after a judgment of dissolution of marriage are separate debts. The debt will be assigned to the spouse that incurred the liability without offset of community funds, meaning the debtor-spouse is solely responsible to pay this debt from his or her own funds.

For example, imagine that prior to marriage, Wendy buys a car at a local Rancho Cucamonga car dealership for $10,000 and at the time of dissolution of marriage has $5000 left to pay off that car. The court will appoint the $5000 debt solely to Wendy and the debt will not be offset by community funds. Similarly, if Wendy buys a car after a judgment of legal separation and incurs a $10,000 debt for that car that debt will be apportioned solely to Wendy without offset of community property funds.

If a debt is incurred after separation for a necessary it is generally apportioned to each spouse equally. As discussed above, a necessity is a common basic need such as food, shelter, or clothing. The court will examine if the liability is a necessary and it will take into account the spouses’ station in life. As described above, if Wendy purchases a $500 pair of shoes, after separation, that debt is deemed a separate debt if the couple is of middle class standing and is deemed a community debt if the couple is wealthy.

The rules described above provide a very generalized and simplistic overview of California’s Community Property law. It should be noted that The Family Code provides specific rules concerning certain types of assets and liabilities that are not discussed in this article. The Family Code is designed to divide both community property and community liabilities as equally and as a fairly as possible.

While the Code often mandates equal division, in certain circumstances it allows the court discretion to divide property and liabilities in a manor it deems it fair. This article is meant to be strictly informational and is not meant to be substituted as legal advice. If you are dealing with legal issues, it is vastly important that you contact a lawyer immediately to discuss your case.

 

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