If you are just joining us today for our discussion on
debt I would highly recommend that you go back to yesterday’s blog post from the
Law Office of Bryan Fagan and review the information contained in that post. In it we introduced
the subject of debt and
divorce and began to get into some popular misconceptions on how debt is handled
in a divorce. It’s an important topic and is a great way to get
acclimated to this subject matter.
With that said, today we will start to unpack the subject of who is actually
on the hook for the debt that was incurred. We will pick up where we left
off yesterday by briefly disussing property owned by you, owned by your
spouse or owned jointly between each of you (otherwise known as community
Separate Property vs. Community Property in the context of household debts
In any marriage in Texas there is property that is considered to be either the
separate property or either your spouse or yourself. This means that the property was either
owned prior to your marriage to one another, or was acquired during marriage
through an inheritance or a gift made specifically to one of you. There
aer other ways for property to be classified as separate property but
for the purposes of this blog post you should be aware that if the property
was not owned prior to marriage that it likely is
Community property that would ordinarily be considered separate property
had you and your spouse never gotten married is the other type of property
that we will be considering today. Examples of this sort of property are
your wages/salary, money created as a result of your owning property that
is considered to be separate property and personal injury settlements.
These are “special” types of community property. In your divorce
you may even hear your attorney or your spouse’s attorney refer
to them casually as “specials”.
The aforementioned types of property are those that are considered to be
managed solely by either you or your spouse during the marriage. All other
types of property have a presumption that is carried with them that control,
access and management over them is done jointly between you and your spouse.
Often times spouses can bypass these categories by agreeing either before
the marriage in a premarital agreement to assign particular pieces of
property in a certain category based on the circumstances of their relationship
What property can a creditor get access to?
If you have agreed in writing to make payments towards a debt then you
may be in a position where the creditor can come after pieces of your
property in the event that the debt payments are not timely made. Depending
on the type of creditor that you are dealing with you will have different
circumstances that can affect your life.
If yours is a contract creditor, such as a credit card company, mortgage
company or bank, then you are dealing with the type of creditor that we
most commonly think of and encounter in our day to day lives. These are
entities that you have sought out for loans and/or credit and have a contractual
relationship as a result. You agreed to be loaned money in exchange for
paying the money back with interest attached.
On the other hand we have tort creditors. These are creditors that you
may never have signed a contract with to have money loaned to you, but
they nonetheless have the ability to come at you to have money paid to
them. Typically these creditors have gone to court in an effort to win
a judgment against you.
What are you liable for in the event of a creditor coming after your spouse?
Suppose, then, that your spouse is responsible for a debt solely. The type
of property that the creditor could get access to depends a great deal
on if we are talking about a contract creditor or a tort creditor. If
we are discussing a contract creditor then all of your spouse’s
separate property. “special” community property as well as
jointly held community property is fair game for a creditor to seize.
Your “special” community property and separate property is
off the table.
Tort creditors can take their judgment and access everything but your separate
property. The power of a court ordered judgment is to be taken seriously
and can impact you and your property even if you are not responsible at
all for your spouse’s debt. Keep in mind that Texas is a debtor
friendly state in that there are limitations to that a creditor can do
to satisfy a debt.
Debt, Divorce and Creditors
In your divorce if you owe money on a vehicle but that vehicle is awarded
by the judge to your spouse it can be repossessed in the event that you
do not make timely payments as agreed to in your contract. The repossession
may hurt your spouse in the immediate sense because he or she is not in
need of a vehicle, but your credit takes the long term ding as a result
of the repossession. The point is that the debt that you incur, and your
spouse incurs, can have long lasting impacts on your life even after divorce.
It is wise to pay down debt and not incur debt where at all possible,
in my opinion.
Questions about debt division in divorce? Contact the Law Office of Bryan Fagan
As we stated at the outset of yesterday’s blog post, debt is not
a subject that many of us consider when we think about divorce. However,
it is prevalent in most all of our lives and can have a huge impact on
your divorce case.
In the event that you have questions on this subject or any other in
family law please do not hesitate to
Law Office of Bryan Fagan. Our attorneys represent clients across southeast Texas and would be honored
to do the same for you and your family. To learn more about our office
please contact us today for a free of charge consultation.