Divorce does not always end your connection to debts created during the marriage. A California family court can assign a debt to your spouse, yet a lender may still pursue you if your name remains on the account.
At Irwin & Irwin, we help clients in Fullerton and throughout Orange County identify marital debts, understand who may be responsible for paying them, and address the risks that can remain after the divorce judgment.
The Answer Depends on When and How the Debt Was Created
California is a community property state. In general, debts taken on between the date of marriage and the date of separation are community debts. Debts incurred before marriage or after separation are usually treated as the separate debts of the spouse who incurred them. The date of separation can therefore have a direct effect on how a debt is classified.
The name on the account does not always decide how the family court will divide the debt. A credit card held in one spouse’s name may still contain community debt if the charges were made during the marriage.
The court may need to review:
- When the debt arose
- What the borrowed money purchased
- Whether the debt benefited the marital community
- Whether it was incurred before or after separation
- Whether either spouse signed the credit agreement
- Whether the debt is tied to a particular asset
Each spouse must disclose known debts during the divorce. California’s Schedule of Assets and Debts, Form FL-142, asks the parties to list their property and liabilities.
What Happens to Debt Incurred During the Marriage?
California courts generally divide community property and community debts fairly equally. That does not mean every account must be split in half. A court might assign one credit card to one spouse and a different debt to the other while working toward an overall equal division.
Consider a couple with the following debts:
- A joint credit card balance of $12,000
- A vehicle loan with a $15,000 balance
- A personal loan of $8,000
One spouse might receive the vehicle and become responsible for its loan. The other might be assigned the personal loan and a larger portion of the credit card balance. The court would consider the full division of assets and debts rather than treating each account in isolation.
Are You Responsible for Debt Your Spouse Hid From You?
You may still need to address a debt even if you did not know it existed.
Suppose your spouse opened a credit card during the marriage without telling you. Whether the family court treats that balance as community or separate debt may depend on when the charges were made, what they were used for, and whether the spending benefited the community.
Charges made for ordinary household expenses may be treated differently from spending that did not benefit the marriage. The records matter. Statements, receipts, transfers, and testimony may help show how the money was used.
Do not assume that an undisclosed account automatically becomes your responsibility. Do not assume that it will automatically be assigned to your spouse, either. An attorney can help you examine the account history and determine what position the evidence may support.
Does a Divorce Judgment Control What Creditors Can Do?
A divorce judgment controls the obligations between you and your former spouse. It does not necessarily change a creditor’s contractual rights.
A judge may order your former spouse to pay a joint credit card. If both names remain on the account, the credit card company may still seek payment from either signer. The creditor was not a party to your divorce and is generally not bound by the agreement between you and your spouse.
This distinction can create serious problems. Your former spouse may miss payments on a debt assigned to them. The missed payments may then affect your credit, trigger collection calls, or lead to a lawsuit against you.
California Courts warns that returning to family court to enforce a debt provision may not repair your credit or stop a creditor from contacting you.
What Can You Do if Your Former Spouse Fails to Pay?
Your divorce judgment may give you the right to seek enforcement against your former spouse. The family court may order that spouse to comply with the judgment or reimburse you for money you had to pay.
That process does not erase your immediate obligation to a creditor. You may need to make a payment to protect your credit and then ask the family court to enforce the judgment against your former spouse.
Court enforcement can take time. California Courts notes that a person may need to use collection procedures involving wages, bank accounts, or other property when a former spouse does not pay money ordered in a family law judgment.
Keep copies of:
- The divorce judgment
- The agreement assigning the debt
- Account statements
- Proof of payments you made
- Collection letters
- Credit reports
- Messages with your former spouse about the debt
These records may help show the amount owed and the effect of the missed payments.
What About Joint Credit Cards?
A joint credit card deserves prompt attention. The balance may continue to grow through interest, fees, or new charges if the account remains open.
Closing a joint account may stop future charges, but it will not eliminate the existing balance. A lender may also refuse to remove one spouse’s name unless the debt is paid, refinanced, or transferred to a new account.
Before closing or changing an account, review any automatic payments tied to it. Make sure necessary expenses, such as insurance or utilities, will not go unpaid.
You should also obtain your credit reports and look for:
- Joint accounts you recognize
- Accounts you did not know existed
- Late payments
- Sudden increases in balances
- Authorized-user accounts
- New credit inquiries
Credit monitoring can help you catch problems before they become harder to address.
Who Pays the Mortgage After Divorce?
The divorce judgment may award the home to one spouse and order that spouse to pay the mortgage. That order does not remove the other spouse from the loan.
The lender may still treat both borrowers as responsible until the mortgage is refinanced, assumed with lender approval, or paid through a sale. Transferring title through a deed does not, by itself, remove a borrower from the mortgage.
This creates a risk for the spouse who moves out. Their name may remain on the loan even though they no longer own or occupy the home. A missed payment could harm their credit and make it harder to qualify for another mortgage.
A settlement involving the family home should address:
- Who will make each payment
- Whether refinancing is required
- The deadline for refinancing
- What happens if refinancing is denied
- When the home must be listed for sale
- How repairs and sale costs will be handled
- What happens if a payment is missed
A promise to refinance “later” may not give you enough protection. A clear deadline and a backup plan can reduce future disputes.
What About Car Loans?
A similar problem arises when one spouse receives a vehicle but both spouses signed the loan.
The divorce judgment may require the spouse keeping the vehicle to make the payments. The lender may still pursue both borrowers if payments stop.
Possible ways to address the risk include refinancing the vehicle, paying off the loan, selling the vehicle, or setting a deadline for removing the other spouse from the obligation. Whether those options are realistic depends on the vehicle’s value, the loan balance, and the receiving spouse’s ability to qualify.
Are Student Loans Divided in Divorce?
Student loan treatment can depend on when the loan was taken out and how the funds were used.
A loan obtained before marriage will usually begin as that spouse’s separate debt. A loan obtained during marriage requires closer review. California law contains specific rules governing educational debts, and the result may depend on the circumstances.
Do not assume that all student loans follow the same rule as credit cards or household debt. Gather the promissory notes, account statements, tuition records, and dates of attendance before negotiating responsibility.
Are Tax Debts Shared?
Tax debt can be difficult because both state and federal tax rules may affect liability.
A joint tax return may create exposure for both spouses even when the divorce judgment assigns the tax debt to only one of them. Relief may sometimes be available through tax procedures, but a family court order alone may not release either spouse from the taxing agency’s collection rights.
When tax debt is involved, review:
- Which tax years are unpaid
- Whether the returns were filed jointly
- Whether either spouse understated income
- Whether penalties and interest continue to accrue
- Whether a payment plan exists
- Whether tax refunds may be intercepted
- Whether separate tax advice is needed
A family law attorney can address how the debt should be divided between spouses. A tax professional may be needed to evaluate relief available through the taxing authority.
Debt Created After Separation
The date of separation often marks the point when new earnings and new debts begin to be treated as separate.
A debt taken on after separation is usually assigned to the spouse who incurred it. A dispute may arise when the spouses disagree about the separation date or when a post-separation debt was used for joint expenses.
For example, one spouse may use a credit card after separation to pay the mortgage, utilities, or children’s expenses. The account may be in that spouse’s name, but the court may need to consider why the charges were made and whether reimbursement is appropriate.
Keep records of post-separation charges. Separate new expenses from older marital balances when possible.
Should You Pay Off Debt Before the Divorce Is Final?
Paying off joint debt can reduce the chance of missed payments and credit damage. It is not always the best use of available cash.
You may need funds for housing, legal fees, taxes, support, or other immediate expenses. Paying one debt may also affect the overall division of property.
Before using savings to pay a large balance, consider:
- Whether the debt is community or separate
- Whether the balance is disputed
- Whether both spouses agree to the payment
- Where the payoff money will come from
- Whether the payment should be credited in the final division
- Whether enough cash will remain for living expenses
- Whether the account will be closed after payment
Document any payment made during the divorce. Keep the account statement, proof of the payment, and records showing the source of the funds.
Steps to Take Before Negotiating Debt
A complete debt picture can help you avoid taking responsibility for an account you did not understand.
Start by gathering:
- Credit reports for all three major reporting agencies.
- Recent statements for credit cards and loans.
- Mortgage and home-equity loan records.
- Vehicle loan statements.
- Tax notices and payment agreements.
- Student loan records.
- Business loan and credit-line documents.
- Records of personal loans from relatives or friends.
- Statements showing the balance near the date of separation.
- Documents identifying who signed each account.
Compare the records with your financial disclosures. Form FL-142 requires parties to list known property and debts, and Form FL-160 can be used to state how a party wants those items divided.
Do Not Rely Only on Who Gets the Debt
A sound divorce agreement should address more than the sentence, “Husband pays Visa” or “Wife pays the car loan.”
Consider including terms that cover:
- The exact account and current balance
- The payment deadline
- Refinancing or sale requirements
- Proof of monthly payments
- Notice of missed payments
- Protection if the creditor pursues the other spouse
- Reimbursement for payments made by the wrong spouse
- A deadline for closing joint accounts
These terms cannot force a lender to release you. They can make the obligations between you and your former spouse clearer.
Schedule a Consultation With Irwin & Irwin
Debt division affects more than the final numbers on a divorce judgment. It can affect your credit, housing options, monthly budget, and ability to move forward.
Irwin & Irwin practices exclusively family law. We help clients in Fullerton and throughout Orange County identify marital debts, review proposed settlements, and address accounts that may create continued exposure after divorce.
Schedule a consultation with Irwin & Irwin to discuss your property and debt concerns before you agree to a final division.