When starting the sometimes long and difficult divorce process from your significant other, some things quickly come to mind: child custody, spousal support, and property division. However, one thing your divorce attorney may not tell you is that the debt you acquired during the marriage will likely follow you after divorce.1
If your name is on any mortgage or car loan, you will likely be responsible for these debts after the divorce. When you sign your name on the dotted line for any type of loan, the creditor will expect you to repay the loan. It does not matter how the debt is divided by the final decree of divorce.2
It is very important that you understand several things regarding your debt before heading into a divorce. A good general rule to follow is to pay off as many of your debts as you possibly can before filing for a divorce. Let’s take a look at some other considerations regarding marital debt.
What is a creditor’s obligation?
If your name is on a loan agreement, the creditor is allowed to come after you if you fail to pay it off. The court may order your spouse to be responsible for a specific debt. However, the creditor is not bound by that decision and can still legally require you to pay when the loan requires payment.3
What happens with debt you were not aware of?
California has long been a community property state. This means that any property, including debt, acquired during the marriage belongs to each spouse. Fairly or unfairly, you can still be held responsible for paying off debt that your spouse acquired, even if you were unaware of it.
Protect yourself with an indemnity clause.
If you and your ex decide to split your debts equally during the divorce, you are not necessarily safe from any impact on your credit rating. If your ex does not want to pay his or her half of the debt you are going to need protection. An experienced divorce attorney will advise you to add an indemnity clause to the divorce agreement. This means that you would be able to take your ex to court if he or she is not paying his or her half of the debts.4
What happens if one spouse files for bankruptcy?
If only you file for bankruptcy for your share of the debts, all of the debts will be wiped out for both you and your spouse. Again, because California is a community property state, if one spouse files for bankruptcy, it affects both spouses.5
What if the spouse’s business has a great deal of debt?
Your spouse’s business debts will be your debt as well, depending on whether the business is considered separate or community property. If the business was acquired by your spouse during the marriage you will likely be responsible for its debts after a divorce.6
Make a list of all debts owed before moving forward with a divorce.
By making a list, you and your attorney can come to the best possible division of debts. It is very important to be completely open and honest about your finances with your attorney. Make sure to identify which debts you incurred before the marriage and which debts you incurred during the marriage.7
Understand who is benefiting from the source of the debts
If after the divorce, the husband is keeping the marital home for himself, then he is benefiting from the home mortgage. Therefore, it makes sense that he should assume the debt of the home. Of course, a skilled attorney would need to make this a part of the divorce agreement and help both sides come to this agreement.8
Call the Divorce Lawyers at Wallin & Klarich Today
The bottom line is that your final divorce agreement may not safeguard you from financial hardship in the future. Just because you and your ex-spouse came to an agreement, does not mean that he or she will follow through on that agreement. This is why having a knowledgeable attorney carefully guide you through your divorce is absolutely critical. The attorneys at Wallin & Klarich have been successfully helping our clients with these complicated matters for over 30 years.
With offices located in Orange County, San Bernardino, Los Angeles, Torrance, Riverside, West Covina, Victorville, Ventura, San Diego and Sherman Oaks, one of our knowledgeable attorneys is available to help you no matter where you work or live.
Call us today at (888) 749-7428 for a free phone consultation or visit www.wkfamilylaw.com. We will help get through this together.