Dividing Property and Debt During Divorce FAQ
How property and debts are divided when you get divorced.
How are property and debts divided at divorce?
It is common for a divorcing couple to decide about dividing their property and debts themselves (with or without the help of a neutral third party like a mediator), rather than leaving it to the judge. However, if a couple cannot agree, they can submit their property dispute to the court, which will use state law rules to divide the property.
Courts divide property under one of two basic schemes: community property or equitable distribution. Debts are divided according to the same principles.
- Community property. In Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Puerto Rico, all property of a married person is classified as either community property (owned equally by both spouses) or the separate property of one spouse. At divorce, community property is generally divided equally between the spouses, while each spouse keeps his or her separate property.
- Equitable distribution. In all other states, assets and earnings accumulated during marriage are divided equitably (fairly), but not necessarily equally. In some of those states, the judge may order one party to use separate property to make the settlement fair to both spouses.
Division of property does not necessarily mean a physical division. Rather, the court may award each spouse a percentage of the total value of the property. Each spouse will get personal property, assets, and debts whose worth adds up to his or her percentage. (It is illegal for either spouse to hide assets in order to shield them from property division.)
How do we distinguish between community and non-community property?
Very generally, here are the rules for determining what's community property and what isn't:
- Community property includes all earnings during marriage and everything acquired with those earnings. All debts incurred during marriage, unless the creditor was specifically looking to the separate property of one spouse for payment, are community property debts.
- Separate property of one spouse includes gifts and inheritances given just to that spouse, personal injury awards received by that spouse, and the proceeds of a pension that vested (that is, the pensioner became legally entitled to receive it) before marriage. Property purchased with the separate funds of a spouse remain that spouse's separate property. A business owned by one spouse before the marriage remains his or her separate property during the marriage, although a portion of it may be considered community property if the business increased in value during the marriage or both spouses worked at it. If separate property is commingled with community property during the marriage, it may become community property, either in part or entirely, depending on the circumstances.
- Property purchased with a combination of separate and community funds is part community and part separate property, so long as a spouse is able to show that some separate funds were used. Separate property mixed together with community property generally becomes community property.
Who gets to stay in the house?
If children are involved, the parent who spends the most time with the kids, or who provides their primary care, usually remains in the marital home with them. If you don't have children and the house is the separate property of just one spouse, that spouse has the legal right to ask the other to leave.
If, however, you don't have children and you own the house together, this question gets tricky. Neither of you has a legal right to kick the other out. You can request that the other person leave, but you can't require it. If you and your spouse don't come to a decision, the court will decide for you during divorce proceedings or earlier, if you ask for a temporary order on the issue. (For more information, see Temporary Orders in Family Court: Quick Decisions on Support and Custody.)
If your spouse changes the locks or somehow prevents you from entering the home, you can call the police. The police will probably direct your spouse to open the door and let you back in. When you both own the home, the only time you can get your spouse to leave is if your spouse has committed domestic violence and a judge grants a restraining order.
Whatever you do, do not claim domestic violence has occured just to get your spouse removed from the home. (Some people have resorted to this extreme tactic.) Once a judge realizes this has occurred, the party claiming violence may be asked to vacate the home and the judge may be biased againt him or her during future negotiations. If you believe you are a victim of domestic violence, but are not sure, go to the Yellow Pages and call your local domestic violence hotline.
For detailed and practical advice about making financial decisions during divorce, see Divorce & Money: How to Make the Best Financial Decisions During Divorce, by Violet Woodhouse with Dale Fetherling (Nolo).