Divorce can be hard on your finances, as well as your emotions. Sharing a home is cheaper than living alone. Economies of scale reduce the cost per person of cooking, turning on the washing machine, running a car and more. When you divorce, your living costs per person may rise, so it is essential to begin your single life on as sound a financial footing as possible.
Do not forget about the existing debt you and your spouse may share. Like your assets, you will need to divide this as part of the divorce process. Under California law, assets and debts are considered either community property or separate property.
Community property is anything acquired during your marriage or bought with your wages while married. Things you brought into a marriage, inherited or were gifted while married, are separate property. Consider assets and debt as a whole to be split equitably rather than focusing too much on particular items. For instance, if your home is worth one million, but you have half a million in debt, you may be better selling the house to pay off the money owed. While it would only leave half a million to split between you, it avoids wasting money on interest.
It is crucial to avoid taking on debts that do not belong to you:
- Did your partner bring debt to the marriage?
- Have they accrued debts on a spending spree since you decided to divorce?
- Were any loans taken out for their sole benefit, not yours?
It can be challenging to untangle finances when you have been married for some time. Seek legal help to understand what debts you should and should not take responsibility for. Doing so can give you a more stable financial base on which to build your new life.
