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Divorce negotiations must resolve debt as well as asset division

When negotiating a marital property settlement in California, it is important to remember that debt owed by the spouses jointly must be resolved as part of the agreement. If that is not done, troubles with debt can crop up long after the divorce has been entered and finalized. For example, some credit cards may have started out as the debt of one of the parties only.

However, after years of mutual use, the card may have taken on both names as borrowers. The other spouse's signature may also be entered on many or most of the purchases, making it problematic whether he or she is obligated. In addition, sometimes a spouse is asked to co-sign on a loan for the other spouse's use. If the matter is not resolved during divorce negotiations, the co-signing spouse may end up with the tab years down the line.

It is highly recommended that each party obtain their credit report prior to the divorce. This will give a better picture of what the creditors believe that a party owes. To the extent possible, the parties must decide which accounts will be assumed by each of them during the divorce negotiations. Action must be taken to remove the non-obligated spouse from each respective account.

However, it may be difficult to remove one's name from a mortgage or car loan or other types of transactions. In these situations, a divorce attorney will guide the client through the process of deciding whether a refinancing will be necessary and the details of how to go about getting that done. In some cases, refinancing will be the only way to get free from an account or to get the other party off of the account. To cover eventualities where a spouse does not live up to taking care of an account as agreed, the settlement document should contain an indemnity and "hold harmless" clause, acceptable under California law, that will more easily relieve the non-obligated spouse from further problems.

Source:, "Marital Debt: Who's Responsible and How Can You Avoid Getting Screwed?", Vikki Ziegler, Nov. 7, 2017

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