Negative Asset Cases

In San Diego, given the current economy, many residents now owe more than their home is worth and have significant credit card debt. In the San Diego Superior Court, the Judges follow the law of the State of California. There are several court houses in San Diego County including Vista, El Cajon, Chula Vista and two in downtown San Diego. One of the San Diego Court Houses is on 6th Avenue and the other San Diego Court House is on 4th Avenue.

The general rule in dividing property is one half of the community property assets to each party and one half of the community property debt to each party. There are exceptions, however, and one exception is a finding of a breach of the fiduciary duty and the other [and much more common] is a negative asset case. In a negative asset case, the division of the debt can be unequal and in proportion based upon ability to pay. This can be separate property assets or disparity of income. There are many cases which discuss negative assets cases and some illustrations are listed below. You will need to have an experienced San Diego divorce attorney who can evaluate the case to determine if it is a negative asset case and then argue the non equal division. This can mean, in a negative asset case of over $50,000 a non confirmation of the entire $25,000 which would normally be confirmed to each party.

In one case [Schultz], the husband and wife had debts exceeding $20,000. The only asset was the family residence which had approximately $43,000 in equity. In that case, which went to the Court of Appeal, the general rule is that there is equal division of liabilities and assets. If this is a positive asset case, the Court of Appeal reasoned, then the trial court has no discretion to adjust the division of the remaining assets to reflect equity and not an equal division.

This is contrasted, in this second case [Eastis], in which the Court of Appeal found that the obligations exceeded the assets. In this case, the debts were $6,450 and the assets were $5,250. The division in the trial court was unequal in both assets and debts. The Court of Appeal reversed on the division of the assets and stated that this need to be divided equally however that the liabilities could be divided between the parties equitably depending on the respective parties ability to pay. The Appeals Court called this a “bankrupt marriage”. This case had been considered “modified” by Family Law Code Section 2622(b) which states that “To the extent that community debts exceed total community and quasi community assets, the excess of debt shall be assigned as the court deems just and equitable, taking into account factors such as the parties’ relative ability to pay.”

This is further contrasted, in this third case [Vanderbeek], in which the Court of Appeal found that an unequal division of the property can accompany an unequal division of the liabilities. In this case, the wife was awarded $3,325 in community property and the husband was awarded $390,000 in community property and $370,000 in debts with an additional credit of $29,000 for payments made on community property debt after date of separation. As such, the husband took more in debt than in assets. This case, basically, holds that when there is not sufficient community property assets to cover community debts, then it is possible to have an unequal division of both assets and debts.

All cases need to be individually analyzed by an experienced and competent attorney. Again, this is a very complicated and complex area of the law and, depending on whether there is a positive or negative asset case, there could be difference of thousands of dollars in the difference of assets and debts confirmed and assigned to each party. The law in this area and all areas change often and all law must be reviewed and researched to make sure it is current prior to implementing any legal strategy.

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