Monday, May 3, 2010

DIVIDING DEBT: Be Sure Cover Everything in Your Judgment

When a spouse finally nears the end of the divorce process, one can typically sense completion, relief and fatigue. The last of the formal paperwork is being put together by the attorneys and everyone is postured to get the last documents filed with the court and on with their lives. However, this phase of a case can be the most critical of all: the proper completion of the judgment paperwork by the inclusion of all the assets and debts affecting the marriage.

If you overlook something in the agreement or not have the settlement language drafted in a way to thoroughly protect your legal rights, problems and resulting legal battles may lay ahead.

Lets look at a recent case entitled CMRE FINANCIAL SERVICES v Parton (4/29/10) 4 Civ DO55266: Wife was sued by a collection company for the post separation debts that husband incurred. The medical bills were listed in wife's petition for divorce and at the time of judgment, the court did not assign wife this debt.

CMRE sued both husband and wife for the debt claiming that the debt was the joint responsibility of the parties claiming that wife was still liable for the debt under Family Code 914 which holds a spouse can be held liable for the other spouses debts if they are deemed necessaries of life. Wife countered with Family Code 916(a)(2) which protects the spouse from the other persons debt if it is not assigned to the spouse in the divorce judgment.

The California Appellate court reversed the lower court decision that went against wife holding that Family Code 4302 (spouse is not liable for post-separation debt incurred for the other spouse's necessities of life unless the parties have so stipulated) and Family Code 916(a)(2) protect the wife from the debt collector's pursuit of the debt.

Better planning and draftsmanship of the judgment might have made a difference here. Adding specific language in the judgment to cement the debt as solely belonging to husband and by referencing the Family Code sections most relevant to this 3rd party debt collection problem might have made the creditor CMRE think twice about suing the wife.