What Happens to Debt during a Divorce?

“What’s mine is yours” is a common sentiment meant to convey the very real partnership that forms between two people during marriage. Unless otherwise specified by a prenup or postnup, spouses in California are entitled to 50% of their community (marital) property, which includes any assets acquired during the course of marriage or separate assets commingled with community property.

When it comes to property division, it’s common for people to focus on assets that are “in the black,” so to speak. In other words, people often think about their homes, vehicles, items of significant value, retirement accounts, investment portfolios, cash – you name it. What people don’t often think about in terms of property division, though, is debt.

Debt is treated just like any asset during a divorce in California, albeit it’s like the anti-matter of wealth. When two people get divorced in this state, their debt is usually split 50/50 along with their assets. This means that any debt incurred during the marriage is subject to equal division between the spouses.

An Exception: Wasteful Dissipation of Assets

An important exception to the equal division of community debts is when one spouse generates significant debt through the wasteful dissipation of community property. Wasteful dissipation involves consuming, giving away, mismanaging, transferring, or otherwise adversely affecting community property in a manner that would affect how much property is left to divide during the divorce.

Examples of wasteful dissipation might include the following:

  • Running up the community’s credit card balances upon learning of the other spouse’s intention to divorce
  • Gambling away a significant amount of community property, such as a savings account
  • Spending a large sum of money on an extramarital affair
  • Using community assets to purchase recreational drugs and alcohol
  • Invests a significant sum of community money in volatile stocks
  • Hides community property from the other spouse during the divorce

If a judge determines that a wasteful dissipation of assets has occurred, the total value of the assets missing can be applied toward the spending spouse’s share of community property. Any debts incurred by the spending spouse may also be solely assigned to them. If the spouse “overspends” their share of community property, they may be liable to make payments to the other spouse until the other spouse receives their complete share of the property.

Do You Need Help with Your Divorce?

If your divorce involves a lot of debt, you need an experienced attorney to help you make sure you’re not responsible for more than your fair share. We can protect our clients from becoming financially burdened by their spouse’s separate debts or debts incurred through wasteful dissipation.

To learn more, contact Clarey & Hammond, LLP online now.