False debt in a California divorce: What to watch for

False debt in a California divorce: What to watch for

Most of the time, when anyone talks about property division in a California divorce, they talk about the shared assets, but the shared debts matter just as much, if not more. You see, the marital estate comprises both assets and debts, meaning both are shared equally. But debt can play a massive role in the final, equal division of the estate.

What equal ownership of debt can mean for your divorce

As any business knows, assets and debts balance each other. When the discussion comes to the division of the assets, the debts must also divide. The ultimate share of the marital estate must be equal, but there can be a significant amount of discussion around how to divide the debts appropriately. However, debt can also manipulate the final results.

False debt is a tool for concealing assets.

We’ve written previously about concealing assets, but it bears mentioning again. In cases where significant assets are at stake, some will take aggressive steps to maintain a larger-than-they-are-entitled-to share. That’s where false debt steps in.

False debt is debt one incurs from a source that intends to never ask for repayment. A prime example of a false debt is an individual taking a loan from a friend, but only on paper. Since either party to the marriage can take out a loan on their own, that false debt could come into the discussion of marital property, changing the ultimate value.

However, false debt and all other forms of asset concealing are against the law. If a party is seen to have taken these actions, the court will penalize them significantly.

The need for skilled, attentive representatives

All family’s finances are highly complex, and it can be highly complicated to find discrepancies in the asset division process. This is why turning to experienced attorneys can help. They can closely review the entire marital estate and investigate any suspicious activity with the benefit of experience and – at times – skilled forensic accountants.