The topic of finances can create panic for anyone, but when you add divorce to the mix, it tends to be especially stressful.
When entering into the sensitive financial discussions of divorce, there are two main financial issues to be highlighted – property and debt.
When dealing with properties there are generally 3 things to consider:
- Separate property
- Community property
- Fair market value of each property
In order to complete your divorce in California, you have to file a Schedule of Assets and Debts or Form FL-142.
This is a form that has to be exchanged with your domestic partner or spouse and is when one party is required to list their assets and debts, including community and separate property, to the other party.
Once each party has filled out their own Form FL-142, reviewing and comparing the information helps to determine whether you agree or disagree on whether some things are community or separate, or how you both value community properties. Every instance is different, but generally the community property can be an opportunity to split up things into equal share for both parties involved.
This is all very important, as reviewing and coming to an agreement of the properties has a big impact on whether or not there is a possibility of settling your case, or whether you’ll need to go to trial.
And that brings us to an unpopular topic – debt.
When reviewing and analyzing each spouse’s debt, it’s important to remember that just because you might come to an agreement with the other party, it doesn’t mean that the lender or the owner of the debt has to honor the agreement with your ex-spouse.
This is especially true of most peoples’ financial nemesis – credit cards.
So if your ex-partner agrees to pay off a credit card bill but misses a payment, that credit card company could then come after YOU and your credit. And this could also include any late payments or fees that are associated with late payments.
When it comes down to reviewing and dividing up debt, there are a few things to consider:
- If selling property is an option, both spouses may agree to using the profits from the sale to pay off credit card debts and eliminating any chance of defaulting on future payments
- Student loan debt is usually the responsibility of the person who originally incurred it if it was before marriage but California is a community property state, so if the student loan debt began AFTER the marriage, each spouse or partner may be responsible for one-half of the debt
- If an agreement is made where one person will be paying off a credit card, they could potentially get a new credit card in their name only and do a balance transfer to avoid any financial confusion with payments going forward
Like most portions of divorce proceedings, reviewing and agreeing on finances can seem overwhelming. To make sure that you’re acting in your best interest and avoiding any potential financial mistakes for the future, contact our office for a consultation!