How to divide property and debt is often a big issue to navigate in a divorce. After all, even if they're on friendly terms, spouses can have very different ideas as to what's fair.
When divorcing spouses can't agree on property and debt division, they have to go to court, where a judge will apply the state's laws to craft a property division order. Many divorcing couples, though, are able to reach an agreement outside of court.
Regardless of how you'll resolve your divorce, understanding the basic legal rules can help you make informed decisions as you go through the process.
Depending on state law, courts normally use one of two approaches to divide marital property and debt: community property or equitable (common law) distribution.
Division of property doesn't necessarily mean a physical division. Instead, the court might 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 a fair percentage. (It is illegal to hide assets in order to shield them from property division.)
If you live in a community property state or have opted to treat some or all of your property as community property (possible in only a few states), the general rule is that spouses equally own all property either one acquires during the marriage.
However, there are exceptions to the general rule—some property is classified as separate property or commingled property. The following general descriptions can help you classify your property.
Community property includes:
Separate property belongs to only one spouse. It can include property acquired before and during marriage. It includes:
Commingled separate property is made up of both separate and community property. When a spouse mixes separate property with community property during the marriage, the separate property can become partially or wholly community property. For example, when one spouse puts separate property money into a checking account used by both spouses, the separate property funds likely become community property. On the other hand, a court might consider property purchased with a combination of separate and community funds as part community and part separate property, so long as a spouse can demonstrate that separate property funds were used to make the purchase.
Which spouse remains in the family home depends on the circumstances. Although judges will look to see who holds the title to the house, the name on the title doesn't determine who will stay in the family house.
When allowing one spouse to remain in the family home is unfair to the other spouse or results in an uneven distribution of property, judges often will award the home to one spouse on the condition that the spouse pay the other to make up for the imbalance (a "buy-out").
Couples can maintain control over how marital property and debts are divided by negotiating a settlement agreement. Some couples might be able to work together on their own to divide property. For couples who need help to reach a settlement, though, divorce mediation is a great option. Courts often require divorcing spouses to participate in (free or low-cost) mediation. Alternatively, spouses can hire a private mediator to assist them.
In mediation, the spouses work with a mediator, who is a neutral third party, to discuss any unresolved divorce issues. Mediation can occur in person or online. During mediation, the mediator will guide the couple through the topics that need to be addressed and suggest. The mediator doesn't provide legal advice or make any decisions. If the spouses reach an agreement on how to divide their property and debt, the mediator will normally create a property settlement agreement for them to sign and submit to the judge.
If mediation fails and the couple can't agree on how to divide property and debts, either spouse can request help from the judge. Because mediation is confidential, neither spouse can use any of the statements or discussions that occurred in the unsuccessful mediation against the other.