Divorcing With Debt In California Part 1: Mediation For Fair Resolution

Conversations about money can be difficult in marriage, and even more so leading up to divorce. In fact, money is still one of the leading causes of divorce. Dividing debt can be just as complex and nuanced as dividing assets. 

California divorce courts consider the assets and debts accumulated during the marriage to be community property and shared debt. Courts often default to a 50/50 split, regardless of who incurred the debt, who benefited from the spending, or whose name is on the mortgage, loan, or credit card. But the standard court division of debt is not always the most practical or equitable division, especially for long-term marriages with significant shared expenses, mismatched spending habits, major investments, or the costs of raising children.

In a highly contentious divorce, litigation can easily escalate conflict, diverting valuable energy and resources from repaying debt to fighting over who is responsible for it. If disputes remain unresolved and your divorce case goes to court, the outcome may lead to decisions that neither party finds ideal, resulting in potentially life-changing personal and financial consequences.   

There is an alternative to traditional divorce—a smoother process that divides marital debt and assets more collaboratively without the need for lawyers or court proceedings: mediation.

Mediation doesn’t have to take the cookie cutter court approach. It’s a smarter, more amicable alternative to traditional divorce proceedings. McNamee Mediations empowers divorcing spouses to take control of their financial future, facilitating discussions that formulate creative solutions and prioritize the long-term financial stability, clarity, and well-being of both parties. Addressing financial concerns and potential conflict in mediation sets the tone for peaceful cooperation, avoiding confusion and stress in the debt repayment process.

The Truth About Divorce Debt: Mediation May Be Crucial 

Divorcing with marital debt carries important financial implications. It is crucial to understand the distinction between divorce decrees issued by California courts and the contractual obligations of account holders to creditors. Creditors will pursue the sole account holder on an individual credit card or loan, or both account holders on a joint account, for repayment, regardless of how divorce courts assign or divide the responsibility for debt repayment.

For instance, you may be the sole account holder of a credit card or loan that was opened during your marriage. In traditional divorce proceedings, if your case goes to court, the judge may issue a divorce decree that you and your spouse are equally responsible for repaying the credit card or loan. However, missed payments will ultimately lead to collection calls and long-term credit damage to you as the sole account holder, specifically. These direct financial consequences can naturally leave you feeling resentful that the divorce has unfairly impacted you more negatively than your spouse, despite the court’s divorce decree.

If both you and your spouse were joint account holders on a loan or credit card, or if you cosigned a loan for your spouse, creditors will consider both of you legally responsible for the debt, regardless of how the divorce decree divides it. Without clear communication and coordinated efforts in repaying joint or co-signed debts, you may unexpectedly find yourself solely repaying and facing creditors and collection calls alone. If your ex-spouse does not contribute to repaying joint debt, their actions can have significant consequences: emotional stress and heightened financial burden primarily on you, but lasting damage to the credit profiles of you both.

Put simply, creditors aren’t interested in the terms of a divorce decree. Private mediation may be crucial for you and your spouse to have a frank, face-to-face, facilitated discussion about whether or not your spouse is capable of sharing responsibility. 

Master mediator Colleen McNamee has decades of conflict resolution experience, facilitating professional and structured discussions that preserve relationships amicably for the sake of financial responsibility. 

Mediation can reduce the likelihood of one spouse being left to hold the bag, so to speak. It prevents hostile legal and financial disputes and protects children from being exposed to misunderstandings or conflict by addressing the risks of instability upfront and proactively exploring realistic contingencies and creative solutions. For example, the spouse that earns a higher income may offer to take on a larger share of debt repayment and negotiate concessions from the lower earning spouse.

In Part 2 of Divorcing With Debt In California, we explore various options for negotiating the division of mortgages, loans, and credit card debt.

To learn more about mediation for divorcing with debt, give McNamee Mediations a call today.

Call Us Today: +1 (949) 223-3836
E-Mail Us: mmediations@msn.com