Legal Question in Real Estate Law in California

The Family Code of California requires judges to issue divorce decrees as to the former spouses' property that either (1) adopt the voluntary agreement of the parties, or (2) divide both the community assets and the community debts as nearly equally as possible.

So, the better way to get to where she'd like to be, or as nearly so as possible, is to negotiate a property-settlement agreement with him. These are also called marital settlement agreements or MSAs.

Negotiating an MSA that is acceptable to each party and can actually be carried out in the real world of 2010, with multiple properties under water, is going to be difficult and even if the parties are on speaking terms, it will probably require retaining a good divorce lawyer, maybe separate lawyers for each.

I believe a lot of institutional lenders will cooperate with divorcing couples in re-writing their loan(s) to take one or the other off the loan. This would be particularly true of purchase-money loans for owner-occupied property, but they should be approached with respect to modifying the loans on the income property as well.

The divorce lawyer(s) should early-on verify whether these properties are 100% community property or whether there is some separate-property interest, and also verify the current market values and the extent of negative equity.

Whoever winds up with the rental properties can have a bankruptcy judge rewrite the loans to lower the principal and interest.