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Debt and Divorce in Texas, Part Two

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, PLLC 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 property).

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.

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 and marriage.

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, PLLC

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 contact the Law Office of Bryan Fagan, PLLC. 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.