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Property and Debt in a California Divorce

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The majority of married couples have acquired property and debt over the course of their marriage and dividing these can be so complicated that the cost of making a mistake can be very high, especially when a couple as a significant amount of property or debt. Because of the risk, we recommend talking to a divorce attorney before you file for divorce.

If you and your spouse have decided to divorce, there’s a strong possibility that you’re being flooded by emotions and if you aren’t there yet, you soon could be. Since divorce is such a stressful experience, spouses aren’t always in their right minds and they don’t always make the best decisions regarding their property and debt – this is yet another reason why it’s critical to enlist an experienced attorney from the start.

What is Marital Property?

When getting a divorce, it’s important to understand what counts as “marital property” under California law. Marital property includes: 1) anything that you can buy or sell, and 2) anything that has value. “Marital property” refers to property acquired during the marriage and owned by both spouses.

Marital property includes:

  • Your house
  • Automobiles
  • ATVs
  • Boats
  • Motorcycles
  • RVs
  • Collectibles
  • Fine art
  • Furniture
  • Real estate
  • Cash and bank accounts
  • Security deposits on homes or apartments
  • A business
  • A patent
  • 401(k) plans and pensions
  • Investments

When you file for divorce, you and your spouse must decide how to divide the marital assets, which were acquired during the course of your marriage. Separate property is not subject to division and it refers to property acquired by the spouses individually before the marriage, as well as gifts and inheritances received during the marriage but in one spouse’s name alone.

You may not want to deal with dividing your property; you may have even reached an informal verbal agreement with your spouse about it. However, for you to obtain a divorce, you’ll need to reach an agreement in writing so the judge can make a formal order.

“Does this mean we have to go before a judge to discuss property division?” Not necessarily. Often, couples reach an agreement on dividing their property and debts outside of court; this is called a marital settlement agreement. Once this agreement is drawn up, all we need to do is get the judge on your case to sign off on it.

Until you get the judge’s signature, legally the marital property belongs to you both, regardless of who is controlling it. It’s the same with debts. If you reach an agreement and divide them without a formal court order, you both continue to be responsible for all of the marital debts even if you “broke up” and are living under separate roofs.

California is a Community Property State

In order for you to divide your marital property and debt and finalize your divorce, you’ll need to understand California’s community property laws and how they govern property division in a divorce. Read on as we explain in further detail.

California is technically a community property state, which operates under the principle that everything spouses or domestic partners own, they own together. So, this means that since the date of your marriage, everything you bought, earned or acquired, you own together and it’s the same with debt. Gifts and inheritances are not included.

Even if only one spouse worked for most, if not all of the marriage, his or her unemployed spouse would still have a 50 percent interest in the breadwinner’s earnings during the marriage. Why is this? Because, even when spouses don’t work, they contribute to the marriage in other ways.

Some examples of “non-income contributions” include caring for the couple’s children, managing the household, paying the bills, cooking and cleaning, running errands, etc. If the breadwinner were to hire these services out to full-time employees, they could easily cost $50,000 or more per a year. Cleaning services for example, can easily cost over $40.00 an hour in Los Angeles County!

To illustrate community property: If you bought a motorcycle with money you had been saving from your paycheck every month, and you earned that money during your marriage, the motorcycle would belong to you both, even though you paid for the entire bike with your earnings. How is this possible? It’s because the money from your paycheck was community property since you earned it while you were married. Community debts operate the same way.

Community property includes community debts, which are all debts acquired during the course of your marriage regardless of which spouse acquired the debt. This is true even if the debt was only acquired by one spouse and only one spouse’s name was on the account or loan.

If for example, your spouse accumulated $10,000 debt on a credit card that was in their name alone, you are also responsible for it since it was acquired during the marriage. You could have more community property than you realize, but it’s the same with community debt. If your spouse has racked up debts that you’re not aware of, you could be liable for more debt than you know.

Dividing Quasi-Community Property

“What if one of us accumulated property outside of California during the marriage?” If one of you earned money outside of California or bought real estate outside of California, it would be called quasi-community property.

If quasi-community property had been acquired in California, it would have been treated as community property. The question is, is quasi-community property treated differently? No, it is not. It is treated as community property and it is subject to the same rules of division.

Related: Tips for Negotiating a Divorce Settlement

We hope this information helps. To schedule a free case evaluation with a Los Angeles divorce lawyer, contact our firm today.

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