When debts become marital property

In a divorce most every person going through that process thinks about property and finances as the essential part of the case that does not involve their children. We all work hard to establish a life for ourselves, our children, and our family, and a divorce stands as a potential destroyer of that stability that we have worked so hard to create. As such, the first instinct of many people going through a divorce is to protect their property, and two do so with the least amount of harm done to themselves as possible.

However, it is essential to note that you cannot only think about the property when dividing your marital estate in a Texas divorce. It would help if you were also concerned yourselves with debts in liabilities in your financial life. This is going to be the focus of our blog post today. I want to share some information about property division in a divorce, your community estate, how it could be divided, and how debts in your marriage play into both subjects. If we think about the property a great deal when it comes to divorce, we need to think about debts just as much in today’s day and age. This is true even if thinking about the obligations isn’t near as pleasant as it is to think about the property.

What does it mean to divide property in a Texas divorce?

You probably already knew that part of your divorce would involve taking property and debts owned or owed by you and your spouse and dividing it between you and them. The devil, as they say, is in the details. How you and your spouse or a family court judge were to end up dividing your property and debt will be the central focus of any part of your divorce that does not involve your children. Before discussing any other subject concerning your divorce, we need to be clear on how property is divided in a Texas divorce case.

If you and your spouse can work together to create a plan between yourself to divide up your property, then the answer to the question we posed in the prior paragraph can be relatively short. Meaning: you and your spouse are free to divide up your property in whichever manner you would like so long as you can agree to it, and the division is not immoral in the opinion of your family court judge. Keep in mind that a judge will review your final decree of divorce before signing it. You or your spouse will also need to appear before that judge to finalize the paperwork at the end of your case. If your property division Is not equitable, a judge will ask you to go back and change things.

Overall, however, as long as your property division Is not entirely out of whack, then you can divide property and debts in whichever way you all choose. The laws in Texas concerning community property in property division within a divorce would not apply. This allows you all to create your Reality when it comes to property and debt division. Of course, this means that you and your spouse would need to work together on this. Some of you reading this blog post probably do not find yourselves in a position where you and your spouse would very readily be able to put aside your differences and focus on creating solutions when it comes to property in debt division.

Otherwise, if you cannot work out a division of your property and debts with your spouse, a judge would need to intercede and determine how the property would be divided. This process is otherwise known as a divorce trial. Both you and your spouse would be able to set forth evidence in an attempt to show a judge just how I believe property and debts ought to be divided. At the end of the problem, the judge would decide how property and obligations between the two of you should be divided based on community property law.

What is Community property law about a Texas divorce?

Texas is one of thirteen American states that adhere to principles and laws regarding Community property. This means that property acquired by you and your spouse during your marriage is presumed to be owned as Community property. It does not matter whose property and its name appear on a receipt or title for that particular property or debt. If the debt was taken out or the property was purchased during your marriage, it is presumed to be part of the community estate. This means that it is subject to being divided.

On the other hand, if you incurred a debtor owned a piece of property before your marriage, that property or debt will be part of your separate estate. The same will be said for your spouse. Individual property is not subject to division and divorce they would be retained by either you or your spouse after the divorce regardless of what happens with the community estate division.

Often, community property states end up allowing spouses who do not work outside the home to retain a more equitable share of that marital estate than perhaps they would have in a form that does not adhere to community property principles. Consider the position you would be in as a stay-at-home parent who never worked outside the home and did not have their name on any of the property that has been purchased during your marriage. Were you to get a divorce outside of Texas; you may be facing a much different proposition, Given that the property in your life does not fear your name in that you contributed no income towards its purchase?

As far as debt is concerned, similar concepts are valid. For example, the mortgage debt on your home may not bear your name, but if it was taken out during your marriage and was used to purchase a home that you live in, then that miracle did is arguably just as much yours as it is your spouse’s whose name appears on loan. Given this, the debt belongs in your community estate and would need to be divided up in some form or fashion during the divorce.

How could debts be divided in your Texas divorce?

Now that we have gone over the basics of community property law and property division in Texas, we can start to talk about how debt is likely to be divided in your particular divorce. As I had referred to it earlier in today’s blog post, keep in mind that community property covers more than just property that you and I can see and touch. We are talking about investments, business ownership, debts in other assets that you do not readily see daily.

When I am referencing debt, I refer to loans such as your mortgage, secondary mortgage or home equity line of credit, personal loans, car loans, credit card debt, and student loan debt. From my experiences as a family law attorney, these debts are the most prevalent among our clients and our client’s spouses. As a result, you and your lawyer will need to determine what types of debt are in play for your case and then determine whether or not that debt is part of the community estate or is part of one of your separate estates and is not subject to division in the divorce.

Texas’s most commonly utilized rule for dividing debt in a divorce is that whichever spouse signed for the debtor incurred the liability. This spouse will end up with that debt or liability after the divorce. It is certainly possible that you could become responsible for an obligation or liability that was not signed for solely by you. Judges are aware that if they were to award you a deficit in your spouse’s name, this could be an issue in the future for your spouse given that they would be liable for that debt but that your responsibility under the divorce would be to pay it. Your decision to pay or not pay the bill could impact their financial future a great deal.

There are options for you and your spouse to take advantage of when dividing the debt in your divorce. Of course, your circumstances will play a significant role in determining how this deck can be divided. Specifically, the kind of debt you are liable for and the number of debts you have on your ledger will be relevant to this discussion. In addition, the size of your community estate in the general level of wealth will determine how many options you all have in front of you to decide from.

This is likely to be your largest asset in the divorce when it comes to the family home. It is also expected to be your most significant debt. Whether your home has a mortgage on it or not, the family house can be sold in the divorce in the profits from the sale of that home utilized to pay down debt after the divorce has concluded. On the other hand, if selling the house is not an option. The spouse who takes on more obligation in the divorce could be awarded a more significant share of the community estate to equalize their taking on that liability.

If you and your spouse have been married for longer than ten years, spousal support may be awarded; guess who takes on a more significant share of the debt to equalize the financial burdens between the two of you. Finally, the most logical and most straightforward way to divide debt would be for both of you to take out an equal share of the debt burden across all of your debt owed. This solution works best when both you and your spouse earn similar amounts of money.

Remember that what solutions work regarding the debt for one divorce may not work as well for your divorce. For instance, in your neighbor’s divorce, the husband may have stayed in the marital home and refinance the mortgage to obtain a new loan without his wife’s name on it. This way, the wife could walk away from the divorce with equity in the home, and the husband could have maintained residence and ownership of the property in his name only. Keep in mind that the husband would have had to have a credit score and financial profile that was good enough to qualify for a new mortgage. If you and your spouse lack the financial strength to do this, this would not be an option that you all would be able to take advantage of. Please consider working with an experienced family law attorney regarding matters like these to view the full extent of your circumstances.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are an excellent way for you to learn more about Texas family law and our office’s services to clients who work with us. We take a great deal of pride in serving our community and hope to speak to you about how we could do the same for you and your family.

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