Division of Community Property in Divorce Includes Assets and Debts

bank-loan-concept-1446014-1-m.jpgOften when people think about the division of marital property in divorce, they consider mainly the couple’s accumulated assets, such as the family home, bank accounts, investments and other property. But because California is a “community property” state, all of a couple’s marital property – including their collective debts — will be divided equally in divorce. If you are considering a separation or dissolution of marriage, it is important to take stock of everything you two own together as well as what you owe. Courts in San Diego and throughout the state will endeavor to divide all of the assets and debts evenly between the parties. To protect your financial rights in divorce, it is important that you contact an experienced family law attorney who is familiar with the local courts and procedures.

While spouses are free to come to an agreement about the division of their assets and debts, the court will still be required to sign off on the agreement to ensure the fairness of the distribution. Some parties may not realize the relative worth of one item versus another, such as the future value of a pension plan as compared with a set amount of finances in a bank account. Further, complications may also arise with respect to the type of debt each party agrees to take on, such as credit card debt, mortgage payments and others. It is important to note which party is legally obligated to satisfy these debts, despite any agreement between the parties to actually pay off the amounts owed.

Courts will often get involved with the valuation of assets and debts. In a recent case, which we discussed in an earlier blog post covering spousal and child support, the parties both disputed the trial court’s assigned value of the couple’s various assets and financial obligations. The couple was married in 1998; they had two children in 2000 and 2003, and sought a divorce in 2007. At the time of their marriage, the husband had his own real estate development company and later, the couple created a jointly owned real estate company as well. Many of the issues on appeal in this case related to allegations that the court failed to divide the property and debts equally.

On appeal, the court pointed out that under California law, the trial court has broad discretion to divide community property in a way that is not only mathematically equal but equitable and practical as well. Further, if the amount of community debt exceeds the total value of the community assets, the court has the discretion to assign debt in way it deems just and equitable, while taking into consideration a variety of factors, including each party’s ability to pay. On appeal, the husband argued that the court failed to include in its division of property calculation – certain assets that had a negative value, thereby resulting in an unequal division of the community estate. The court of appeals concluded that the lower court erred by awarding certain business interests to the husband at a “zero” value, rather than making findings as to their present (negative) value.

While this case is an unpublished decision, the conclusions reached by the court could serve to inform later family law matters in this jurisdiction. It certainly illustrates the complicated nature of the division of marital property and debts in divorce.

Roy M. Doppelt has been representing parties involved in family law disputes for more than 20 years. Doppelt & Forney serves clients throughout Southern California, including San Diego, Encinitas, La Jolla, and Chula Vista. For a free consultation, contact Doppelt & Forney through our website, or give us a call toll-free at (800) ROY IS IT (769-4748).

Related Blog Posts:

California Court Reviews “Imputation of Income” Underlying Support Orders

Family Court Retains Jurisdiction After Divorce Judgment for Certain Claims

Court Determined Whether Separate Property Has Been “Transmuted” to Community Property