Divorce and Sale of Assets

A divorce can cause great financial strains on everyone involved. As has been seen in most cases, couples in the midst of a divorce, must now find a way to stretch their income to now support two households, rather than just one. On top of this they must also add in attorney fees and other costs of litigation. As a result spouses make attempts to downsize expenses, and often turn towards selling various assets while the divorce is pending.

Sale of Assets is Prohibited During Divorce

Although selling assets during the divorce seems financially responsible it is actually prohibited. Divorce attorneys will advise clients that the spouses involved are prohibited from “transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate without the written consent of the other party or an order of the court, except in the usual course of business or the necessities of life.”

Spouse Able to Petition

Although sale of any property is prohibited during divorce, a spouse can still petition the court for permission to liquidate assets if an exception applies. Under Family Code 2108 family courts have the authority to order the liquidation of community assets if the liquidation helps to avoid unreasonable market or investment risk. The court will determine what is an unreasonable risk and will consider the nature, scope, and extent of the entire community estate.

Family Code 1101

If the sale is in the best interest of the community and consent has been arbitrarily refused or cannot be obtained because of incapacity of the non-consenting spouse then Family Code 1101 grants family courts the authority to order the sale of assets. The “community” is the collective interests of the parties with respect to all the property that was acquired during marriage. What is “in the best interest of the community” and when consent is “arbitrarily refused” is fact specific and thus will differ from case to case.

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