It's very common for divorcing couples to reach an agreement outside of court about how to divide their property and debts. When a couple is unable to settle their dispute, though, a judge will apply the state's property division laws to craft a property division order.
Depending on state law, the court will likely use one of two approaches to divide marital property and debt: community property or equitable (common law) distribution.
Division of property does not necessarily mean a physical division. Instead, 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 a fair percentage. (It is illegal to hide assets in order to shield them from property division.)
Nolo's book Divorce & Money can help you learn more about dividing money during a divorce.
If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin) 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 determine what's community property and what isn't:
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 is not necessarily the final determinant of who will stay in the family house.
Often, 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 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").
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 and Lina Guillen (Nolo).
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 neutral third party called a mediator to discuss any unresolved divorce issues. Mediation can occur in person or online. During the mediation, the mediator will guide the couple through the topics that need to be addressed and possibly suggest solutions that comply with state law. The mediator does not provide legal advice or make any decisions. If the spouses reach an agreement on how to divide their property and debt, the mediator will 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.