The Division Of Assets And Debts In A California Divorce
In this article, you will learn…
- How California divides assets and debts in a divorce case,
- Why the date of separation is important, and
- Why having an experienced attorney can be beneficial.
How Does California Divide Assets In A Divorce Case?
California is a no-fault state, as well as a community property state. This means that no matter what the main cause of the breakdown of a marriage, the court does not weigh how the divorce is going to go based on fault. People just say that they want to get divorced and then they figure out how to divide everything up.
Being a community property state means that the court looks at equal distribution of the common estate. Other states sometimes call it ‘equitable distribution’. With equitable distribution, there is the belief that, due to the resources of either party, it would be equitable to have unequal distribution of the community state out of fairness. California does not operate that way.
California solely looks at what is in the community from the date of marriage to the date of separation. Anything within this time frame is generally considered community property. There are exceptions and people can make arguments as to why certain things may not be community property. As a general rule of thumb, however, anything acquired from the marriage to the date of separation is the community and should be divided equally. This would include anything that’s an asset or a debt.
The question is: How do those things get divided?
This is where agreeing could be the better option for parties, rather than going to court. The court is not going to get creative. They are going to cut everything in half and give each party one half. That means that anything that can’t be cut in half, such as a house, would need to be sold so that the proceeds can be split between the parties.
If one party doesn’t want to sell the house, they may be able to come to an agreement with the other party in order to keep the house. This is where there are benefits to working together to come to creative agreements instead of having the court order the house to be sold. One party may give the other party other assets to equal their share of equity in the home in exchange for the home and then be responsible for whatever debt is associated with it.
We call this the idea of distribution, which would be like taking a knife and slicing everything you have in half. You can also do an equitable distribution, which would be going down the list of assets and debts and distributing them into both parties’ columns on a page. In the end, you would tally both columns up and show what the value is of each list. If there’s an unequal distribution, the person can then pay a cash amount to equalize the distribution of the money debts or funds.
In California, we look only at the community property and divide that to as close to equal as possible.
Is The Date Of Separation Important For The Division Of Assets In A Divorce?
Yes, the date of separation is important for the division of assets in a divorce. The date of separation can be a point of contention as it is not solely defined as the day the divorce is filed. Sometimes people will be separated for months or years before filing for divorce. The date of separation is going to be the date the court considers when dividing the community property. Anything acquired after the date of separation is going to be considered separate property.
So, in short, the date of separation is very important in ascertaining what assets and debts are of community and what are separate. It’s something to really take into consideration, as it is not an arbitrary date.
If there isn’t a meeting of the minds, you have to establish what happened on the date you assert that the marriage separated. Sometimes that will be when the parties stopped behaving as spouses. It could be when the spouses stopped sharing a bedroom, even if they continued to live in the same house. They are not acting as spouses anymore, so that is usually a defining factor in what is considered the date of separation.
Is Property Acquired Before The Marriage Automatically Deemed Separate Property In California?
Property acquired before the marriage is automatically deemed separate property in California unless there was a point during the marriage when the owner changed the title to include the spouse.
If there are property interests before the date of marriage that the parties purchased together or if they invested in things together prior to the marriage, that becomes a civil matter. It isn’t something that the family court would be involved in distributing. At that point, it is a business matter or a civil contract, because it isn’t considered community property.
How Are Debts Divided In a Divorce Case In California?
Debts are divided just like assets in a divorce case in California. Debts are divided equally between the two parties.
When we’re looking at a debt associated with an asset, such as a house or a car, it can be divided one of two ways:
- The asset can be sold or liquidated to pay off the debt and any remaining equity is split between the parties, or
- One person can keep the asset by looking at the equity minus the debt owed and paying the other party half of that acuity.
If you do a buy-out, which is what we call it when one party keeps an asset and pays the other party, you would then be taking the debt of that asset on your own. You would be able to refinance the asset to move it into your name solely.
If you aren’t able to move the asset into your name, then even if the parties agree that you can do a buy-out, you wouldn’t be able to maintain that asset. This is because creditors do not honor divorce orders or decrease awarding a debt to one party or the other. Creditors won’t give up their right to collect from either party, so if the party who receives that asset in the divorce doesn’t pay the debt associated with it, the other person is then left to either pay the debt or have their own credit damaged.
It’s always the recommendation that anyone taking an asset with associated debt should refinance in your name alone. This will remove the creditor’s ability to go after the other party in the event you default in your payments.
It’s better to award the asset to the person that can pay off the debt, and then they would get the credit. Having that debt is considered a negative aspect, so that will be credited against other assets that they will be attaining as part of the divorce.
Why Is Hiring An Experienced San Jose Family Law Attorney In My Best Interests?
Any time you have a major life decision to make, it is a benefit to you to get external input from a professional. Some things an experienced family law attorney can do for you are…
- Consult with you on your specific situation,
- Prepare the background of your case,
- Draft up the paperwork for you, and
- Ensure that your rights and best interests are being protected.
Divorce can be complicated. It’s an emotional and personal process that has a serious impact on your life, your livelihood, your assets, and your debts. If children are involved, there are even more complexities to consider in the process.
A lot of times, decisions in divorce are driven by emotion. When things are driven by emotion rather than what makes the most sense, even what is legally required can become very messy. People can get so bogged down in what they believe to be fair or right, or even with punishing the other party, that they lose sight of what really matters. An attorney can help refocus you so that you are working toward the best possible outcome.
The court is bound by the laws and what they have a legal right to make decisions on, not on mediating between the parties. Having a neutral third party involved can bring the temperature down and help you reach an agreement and get you in a place where everybody can do what’s best and move on with their lives.
Finding the right attorney for you is similar to entering into any other relationship. You want to look for an attorney who…
- Is experienced in situations similar to yours,
- You can communicate openly and honestly with,
- You feel you can trust with your best interests, and
- Who will help you reach creative solutions.
Even if you feel like you are working well with the other party, sometimes you just need an attorney to help you dot the eyes and cross the tees. You want an attorney who isn’t going to stir the pot or cause any discord, but read over your documents and ensure everything is in place. If there are trust issues or concerns about the other party, it’s important to manage those issues and do what is necessary to ensure that there is a good outcome for all parties involved.
For more information on Division Of Assets & Debts In a California Divorce, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (408) 909-4586 today.