I Am Getting A Divorce – What Will Happen To My Assets and Debt?

     In community property states, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, the Court is statutorily required to divide community property. “Community property” includes all property obtained during the marriage, other than through gift or inheritance to one party. Community property is to be divided equitably, which means ‘near equal.’ In other words, rather than dividing a couch, one person may get the couch, and the other party may get the entertainment center.
     Houses that are jointly owned are generally either sold or kept by one party. If one party keeps the house, that party generally needs to refinance the house and pay the other party his or her share of the equity in the house. If the parties cannot cooperate to sell the house, the Court can appoint a Real Estate Commissioner to preside over the sale.

     A party may have an interest in property even if that person is not on the title. For example, if the parties improved a home during the marriage in a manner that increased the home’s value, then the community may have what is called a “community lien” against the property. Also, sometimes people place a piece of property in one person’s name for financial reasons, but the parties intended for the property to be owned by both parties.
     Generally, if someone had a sole and separate piece of property and then placed it in both parties’ names, it will be considered community property. Also, if one person contributed sole property or moneys toward a community asset, the contribution is generally considered a gift. There are exceptions to the rule.
     The Courts normally divide retirement accounts using a Qualified Domestic Relations Order. This allows the parties to roll over a portion of a retirement account into another retirement account without incurring tax consequences. Courts can also divide businesses, life insurance policies, vehicles, household items, frequent flyer miles, stocks and even pets. Again, either one asset will be offset against another asset (for example, the husband will get the Mercedes and the Wife will get the BMW), or one party will get the asset and pay the other party his/her share of the equity.  If the parties do not agree on the value of a piece of property, they can hire experts to determine the value.

     As to debts, the Courts generally divide those debts incurred during the marriage and prior to the date a party is served with the Petition for Dissolution of Marriage. Creditors, however, are not bound by a Divorce Decree that awards one party a debt; creditors can come after either party. However, a party who is forced to pay another party’s debt may be able to recover the funds by filing an action in Court. 
     There are many complexities in dividing assets and debts in a divorce. If you are thinking of getting a divorce, if you are getting a divorce, or if you are even considering getting married, it pays to consult with an attorney, know your rights and understand the law.