When involved in a divorce in California, it is important to understand that by taking out a loan on your separate property you have a fiduciary duty to disclose this to your soon-to-be-ex spouse.  Family law courts have held that by not being totally forthright with such disclosures, a party is in breach of their fiduciary duty.

This is covered through Family Code § 1101 (a) and (g), and the case of In re Marriage of Quay (1993) 19 Cal.App.4th 961, 972-973, whereby the trial court was granted permission to unequally divide marital properties if it finds that one spouse breached his or her fiduciary duty to the other.

In Quay, the court awarded the property and its encumbrance to the Wife and ordered her to pay Husband the share of the equity of the property at the time of conveyance.  This amounted to a $59,000 breach, which probably really wasn’t worth it to the Wife in the long run.