Dividing Marital Debt in California
Credit-card balances, mortgages, and student loans can weigh heavier than assets during divorce. This guide shows how California classifies, allocates, and enforces repayment—plus actionable tactics to safeguard your credit.
Most spouses expect to split their home and savings, yet few prepare for the complex web of joint liabilities created during marriage. California’s community-property rules presume debts—just like assets—belong equally to both parties at the date of separation. Judges may offset imbalances with cash payments or asset credits, but the underlying creditor contract still binds whoever signed. This guide explains:
- How courts distinguish community vs. separate debt
- Strategies for allocating credit-card balances and mortgages
- Interactive checklist to track payoff priorities
- Special rules for student loans and business obligations
- Post-judgment enforcement tools if an ex-spouse defaults
1. Community vs. Separate Debt
Community Liability
Under Family Code §910, both spouses are responsible for debts incurred by either spouse during marriage and before separation—regardless of who signed the contract or who benefited.
Examples include everyday credit-card purchases, auto loans, and medical bills for the family. Even a card in one spouse’s name is presumed community if used between the date of marriage and date of separation.
Separate Liability
Debts may be separate when they arise before marriage, after separation, or from a spouse’s non-marital conduct. Courts also carve out exceptions—educational loans (Fam. Code §2627) remain the student spouse’s responsibility, even if taken during marriage.
Example: A cosmetic-surgery bill incurred two months after separation is presumptively separate; the community is not liable unless the procedure was medically necessary and benefited both spouses.
Judges can order an equalization payment when one spouse keeps more debt than the other. For a deeper dive into asset offsets, visit our property-division guide.
2. Credit-Card Debt Strategies
Credit-card statements often hide years of mixed purchases—groceries, family vacations, and occasionally secret splurges. California presumes charges during marriage are community unless you trace them to a separate purpose. Start by downloading at least 24 months of PDF statements and cross-checking the merchant category codes (MCC). A spa charge flagged as “Personal Care” can rebut the community presumption if the spa visit benefited only one spouse.
“Courts look for a clear link between each purchase and a marital purpose. The more documentation you bring, the stronger your argument.”
Practical steps:
- Request itemized statements directly from the issuer—online archives may truncate MCC data.
- File a temporary restraining order under Fam. Code §2040 to halt new charges.
- Classify each purchase: family necessity, joint benefit, or personal “frolic.”
- Negotiate payoff using snowball (smallest balance first) or avalanche (highest APR first).
3. Payoff-Priority Checklist
Use the interactive tool below to track each liability from documentation to final resolution. Your progress saves automatically in your browser.
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Joint Visa – $8,400
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Auto Loan – $14,700
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IRS Tax Arrears – $3,200
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Family Loan – $5,000
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Buy-Now-Pay-Later – $1,050
4. Mortgages & HELOCs
When one spouse keeps the home, lenders usually require a cash-out refinance that removes the departing spouse’s name and pays their equity share. Underwriting now scrutinizes debt-to-income ratios post-support, so prepare updated pay stubs and any spousal-support orders.
Alternative: retain joint names for a limited period with an indemnity clause, but this risks credit damage if the occupant misses payments.
A quitclaim deed transfers title but does not release liability on the note. Judges therefore combine a deed with a refinance-by-date requirement (often 180 days) and an automatic sale clause if the refinance fails.
Example calculation: $600,000 fair-market value minus $420,000 mortgage balance = $180,000 equity. Community split 50/50 means $90,000 cash-out to the departing spouse, reduced by any equalization of other assets or debts.
The IRS treats a buy-out as property settlement, not taxable income. Home-mortgage interest remains deductible only for the spouse who actually pays it. If both names stay on the note, keep careful records to avoid duplicate deductions.
For HELOCs, interest is deductible only if the funds improve the home—using a HELOC to pay divorce lawyers may disqualify the deduction. Consult your tax professional for Form 1098 reporting nuances.
5. Student Loans
California presumes that student-loan debt primarily benefits the student spouse’s earning capacity. Under Family Code §2627, the community is reimbursed for any payments made on educational loans during marriage, plus interest, unless the parties agree otherwise. Practical implications:
- Gather records. Subpoena loan-servicer payment histories to prove community funds paid the note.
- Subtract grants. Only the net loan amount qualifies for reimbursement.
- Apply the 10-year rule. Reimbursement claims expire 10 years after the degree is awarded, so act promptly.
- Offset against support. Judges may consider ongoing student-loan payments when setting spousal support—see our spousal-support guide.
6. Business-Related Debts
Family-owned companies often carry credit lines, supplier invoices, or SBA loans guaranteed by one spouse. Liability turns on when the debt arose and whether community assets secured it.
Due-Diligence Checklist
- Articles of Incorporation & Operating Agreements
- Recent tax returns & profit-and-loss statements
- UCC-1 financing statements for secured loans
- Personal guarantee agreements
- Credit-card statements for corporate cards
A neutral business-valuation expert should factor outstanding debt into fair-market value. Personal guarantees may convert otherwise separate corporate debt into a community obligation if community assets were pledged as collateral.
7. How to Protect Your Credit
- Order all three credit reports and dispute errors early.
- Freeze credit files before filing if identity-theft risk is high.
- Close joint cards or convert them to individual accounts where possible.
- Add a 100-word divorce statement to your credit file for context.
- File Innocent Spouse Relief with the IRS for tax debts created by your ex.
8. Post-Judgment Enforcement
Detailed procedures appear in our enforcement-options guide.
9. Sample Debt-Allocation Spreadsheet
| Creditor | Balance | Debtor Assigned | Community % | Pay-Off Plan / Notes |
|---|---|---|---|---|
| Visa 1234 | $8,400 | Both | 100% | Snowball, transfer to 0% promo |
| Auto Loan | $14,700 | Spouse A | 100% | Refinance within 60 days |
| IRS 2023 | $3,200 | Spouse B | 50% | Installment plan $150/mo |
| HELOC | $25,500 | Spouse A | 100% | Paid from house sale proceeds |
| Sallie Mae | $19,000 | Spouse B | 0% | Separate educational loan |
| AmEx | $5,800 | Both | 100% | Balance transfer to spouse B card |
| Family Loan | $5,000 | Both | 100% | Equal shares by May 2025 |
| BNPL Klarna | $1,050 | Spouse A | 100% | Auto-pay completes in 4 months |
| SBA EIDL | $50,000 | Spouse B | 100% | Business cash-flow covers payments |
| Utility Arrears | $600 | Both | 100% | Split at closing statement |