In California, A Spouse's Business Debts May Be Divided Evenly in Divorce
Divorcing couples in San Diego, and throughout the state of California, have the complicated and emotional task of sorting through their community property to determine how to divide the assets. But spouses on the verge of divorce should also pay close attention to the debts that have accumulated throughout the marriage. Those too may be equally allocated. Each state has its own set of family laws and procedures to follow. In matters concerning property division, the importance of hiring an experienced, local divorce attorney who is well-versed in the particular laws of California, cannot be overstated.
The extent to which a spouse inherits the other's debt depends in large part on the laws of the state within which they were married. Because California is a "community property" state, debts incurred during the marriage will be evenly divided during the divorce proceedings. A recent Fox Business article focuses on what happens to a woman's credit after a divorce if her husband has a business credit card debt. The main message in the article was: the answer may vary from state to state. In most cases, it seems that the person who filled out and signed the credit card application agreement will be the one the company goes after in seeking to recover payment.
While the credit card company is known to go after the signatory when some type of wrong-doing has been detected, if the issuer of the credit card happens to win a judgment against that person, it can still seek the couple's joint assets to satisfy that amount.
There are many ways that people can protect themselves in such situations. Calling the credit card issuer directly to identify the signatory is one way to ensure that you will not be the one they go after in the event of a default in payment. Another way to protect your assets after a divorce is to make sure your funds are in your name only and clearly separate from your ex-spouse's. Of course, if the couple signed a pre-nuptial agreement, all bets are off and each party should consult with a local attorney to understand their respective rights under that contract.
Once a couple has decided to divorce, in order to understand what assets and debts you jointly have, a good idea is to make lists of everything you own and owe. Part of this task is to determine which items are considered community property versus separate property. Once you have that figured out, the logical next step is to calculate the fair market value of the assets.
Under California law, divorcing spouses are required to fill out and exchange with one another a "Schedule of Assets and Debts." Essentially, it is each party's financial declaration of disclosure. Spouses are encouraged to be open and honest in preparing the schedule of information. Even after the debt allocation is completed, there could still be issues that arise later on. For instance, when spouses agree to divide up the debts they owe, it is important to realize that the entities or people you owe the money to are not required to honor or recognize the arrangement between you and your spouse. There are many complicated issues that can arise from the division of community property, especially when it comes to marital debt.
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For spouses seeking to divorce in San Diego, California law generally requires that marital property be divided equally. Identifying marital property and determining its value are critical parts of any divorce case. In some instances, a party to a divorce settlement could later argue that because of fraud or errors made in determining the value of marital property, the court should set aside the settlement. Because the value of marital property is of crucial importance to the outcome of the settlement, spouses are encouraged to hire an experienced San Diego family law attorney who will work to get the best settlement for their case.
Going through a divorce has been described as one of the most difficult times in a person's life. In order to lessen the stress and expense, divorcing couples in San Diego may request that the court order a settlement conference with the intention of resolving any outstanding matters in dispute. By doing so, the parties may be able to avoid taking their case to trial. Under
California is a "community property" state. This means that in the eyes of the law, a marriage makes two people one legal "community." In effect, when couples marry in San Diego, the wealth (and debts) they accumulate become community property, which entitles each spouse to one-half of the total amount. In the event of a divorce, community property and debts are typically divided equally. It is a widely accepted principle throughout the country; in some states it is referred to as "marital property."
Just last month, an appeals court in New York sided with a wife who had been on the losing end of a prenuptial agreement -- and essentially threw it out. While the laws in New York do not govern marriages that take place San Diego, the unexpected decision is sending shockwaves through the Family Law community at large. Divorce attorneys throughout the country are talking about the decision, and many believe that a solidly drafted prenup will still hold up in court, despite the surprising decision. If you are contemplating marriage and believe a prenup is the right agreement for your situation, it is imperative, now more than ever, that you consult an experienced, local attorney to draft the agreement.
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