At the end of a marriage, property division and allocating debt may be resolved through family law proceedings before a California judge. Unmarried couples, however, face significant hurdles with resolving debt issues.
A person’s conscience, instead of the law, may dictate debt payment. Credit cards are a prime example. When a partner accumulates debt on their ex-spouse’s credit card, the ex-spouse is responsible for paying it off.
Car loans are similar. When a partner co-signs a car loan for an auto title to their ex-partner, the partner is liable for the debt when the ex-partner moves away or defaults on debt payments. An ex-partner may file a lawsuit for unpaid debt. However, this requires the payment of filing fees and legal expenses may exceed the cost of retrieving the debt in many cases. A partner, if sued however, should not just ignore the suit. Failure to answer a summons precludes later participation and defense of the summons or complaint.
Many of these issues may be resolved through open communication about finances early in the relationship. Discussions should cover matters such as rent or mortgage payments and expenses like food, housekeeping and entertainment. Determining whether financial contributions are gifts or loans is also important.
A written document, like a prenuptial agreement, may help resolve these issues if a couple ends their relationship. This operates like a contract which may be legally enforceable and sets forth each partner’s financial responsibilities. These agreements also form the basis of identifying the couple’s assets and debts and a candid discussion about their financial responsibilities and challenges.
Partners may also consider entering a joint venture when purchasing major assets such as a house. This could make one partner responsible for paying the mortgage while the other partner agrees to pay for home maintenance. Another joint venture is where a partner agrees to pay for the partnership in return for the other partner’s work.
An experienced family law attorney may assist partners with drafting these agreements and providing information on their options. They can also assist with seeking unpaid debt, property division and other legal matters if the relationship ends.