Debt

Dividing Debts and Liabilities Upon Divorce

California Law on Division of Community Debts Liabilities

Under California Family Code § 910, “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” The “community estate” is comprised of all community property and quasi-community property. This means that creditors may reach the property and assets of the community estate to satisfy outstanding liabilities.

Upon divorce, debts are equally divided between the parties. A spouse’s separate property is not liable for a debt the other spouse incurred before or during the marriage. However, a spouse’s separate property is liable for separate debts they personally incurred.

Under California law, the community estate is not liable for debts incurred after the date of separation but prior to the parties receiving a final judgment of divorce.The Family Code defines “debt” to mean “an obligation incurred by a married person before or during marriage, whether based on contract, tort, or otherwise.” Accordingly, the characterization of debt as community or separate depends on whether a party incurred the debt before or during marriage.

Contractual Debts and Liabilities and Liabilities

Debts that arise from a contract are some of the most common types of debts in the modern world. Contractual debts are incurred when the contract from which said debt arose was formed. For example, credit card debt arises from a contract between the credit card company and its customer. The credit cardholder incurred the debt when they entered into the credit card contract with the credit card company. If the cardholder entered into the credit card agreement before or during their marriage, assets in the community estate are liable for the debt.

Tort-Based Liabilities

Debts stemming from the commission of a tort are incurred at the time the tort occurred. For example, if you negligently caused a car accident for which you owe compensatory damages, you incurred the debt at the time the negligent car accident occurred. If the car accident occurred before or during their marriage, the community estate is liable for that debt.

Debts Occurring After Separation

Just as the date of separation is crucial for property division issues in divorce cases, the date of separation is also the cutting off point for debts of the community estate. If a spouse incurs a debt after the date of separation, but before their divorce is finalized, it is not considered to be community debt.

Reach Out to a Skilled Attorney from Moshtael Family Law Today

Are you facing a divorce involving complex financial issues, such as the division of marital assets and liabilities upon dissolution of marriage? If so, you stand to benefit from the experienced legal advice of a member of our legal team at Moshtael Family Law. We are dedicated to effectively advocating for your rights to community property and the protection of your financial rights upon divorce.

Call Moshtael Family Law at (714) 909-2561 or contact us online for a consultation. We have offices in both Irvine and Laguna Niguel to ensure we can effectively represent Orange County families.

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