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Reimbursement Claims in Texas Divorce cases

When it comes to feeling like you are owed something, perhaps no more can this emotion be felt so strong as when you are contemplating a divorce. This past Saturday I was meeting with potential clients at the Law Office of Bryan Fagan when a lady came in to tell me that she and her husband had been separated for the past year. In that time they had decided to sell the house. The catch was that he had not been contributing to the mortgage at all, nor had he paid any money towards some repairs that needed to be completed prior to selling the house. Needless to say, our potential client was upset and wanted to see if she could ask for any of this money back from him when the divorce was finalized.

What she was talking about- getting money back for what she feels like was a one-sided effort to get a house sold- is really what is known in the family law world as reimbursement. While the concept is a pretty simple one in most parts of society, within the family law world it is both difficult to explain and to implement. Getting to a point in your divorce where you have a viable reimbursement claim that can actually stand to provide economic benefit is easier said than done.

In today's blog post from the Law Office of Bryan Fagan, we will seek to provide you with some information on this subject that comes up a lot but is rarely acted upon in a way that provides real-world benefit to clients.

Reimbursement claims and how they can impact your divorce case

There is a great deal that is unknown about how to properly present a reimbursement claim in your divorce. If it sounds weird to you that something in the law is "unknown" as if we were discussing a mythical animal or hidden location in a remote corner of the globe you would be justified. Attorneys, for the most part, do not know how to present these claims because it isn't clear to what extent evidence needs to be presented in order to meet a burden of proof. Judges don't always know how to handle these type of claims, either.

Fortunately for most people going through a divorce, reimbursement claims typically do not present a major hurdle to clear since most cases do not involve reimbursement claims. However, if you are reading this blog post that probably doesn’t make you feel any better. If you find yourself in a position where a reimbursement claim is relevant to your divorce then stay where you are. Before we go any further, let’s establish what a reimbursement claim is.

What a reimbursement claim is in relation to your Texas divorce

Absent a premarital or marital property agreement in which you and your spouse agree to your own "rules" of dividing up property upon divorce, you and your spouse own the property contained in your community estate and individually own the property in your separate estates. This is relevant because, for example, if your spouse owns a house prior to your marriage then that house will be considered his separate property even if you and he contributed $50,000 of community income towards making improvements on that property.

If you and he were to get a divorce, you could assert a reimbursement claim to allow you to recover any community income proceeds that went towards the improvements that were made on the property. The only way to reclaim that $50,000 would be to assert a reimbursement claim. Reimbursement claims are made in equity, rather than statutory law. Equity means fairness in this context, and it would need to be determined that out of fairness is a reimbursement claim justified.

Leaving it up to a judge to determine what is and what is not fair would leave me feeling a little uneasy. Your judge would essentially have complete autonomy to decide what is appropriate in your case and what is not appropriate. What options are available to a judge, if he or she determines that a reimbursement claim is justified will be discussed in our next section.

What sort of relief can a judge institute for your reimbursement claim?

Supposing that a judge agrees that you should be reimbursed for any community funds that went to pay for an improvement to a separate property item of your spouse. Your next question should be what kind of relief can you seek to have ordered in order to make you whole? Keep in mind that the judge has the total say-so when it comes to handing out a reimbursement award.

If you have a valid reimbursement claim of $50,000 then this is an asset of your community estate that can then be divided between you and your spouse. In the event that your community estate is large enough, and there are sufficient assets elsewhere to be divided, the reimbursement claim can be awarded one hundred percent to your spouse. This would allow you to receive a great share in the division of the actual property that makes up your community estate.

Next, a court can grand you a simple money judgment. It would be a judgment in your favor and against your spouse. You would then be able to utilize any and all of the debt collection laws available in Texas in order to collect on this judgment. Of course, your spouse would have protections of his own if he lacks sufficient property to pay you according to the terms of the judgment.

An option that is utilized a considerable amount from my experience is to award you specific pieces of property that equal the reimbursement claim. In our example, you could be awarded $50,000 of community property that would normally have been split between yourself and your spouse. This would be able to effectively make you whole for having paid community income for the benefit of your spouse’s separate property.

What defenses are available to counter a reimbursement claim?

Your spouse could ask you to submit evidence to prove that the funds used to update and improve the home were, in fact, community funds. If these transactions took place twenty-five years ago it could be very difficult to prove your allegation. Bank transaction logs are readily available now in the age of the internet, but decades ago you would have needed to request that information from your bank or kept receipts to show the source of the funds and any transfer of those funds from a bank account to a business.

In terms of actual, legal defenses to a reimbursement claim, your spouse could argue that it isn't fair that the claim is allowed to move forward or that he has his own reimbursement claim to present that would cancel out your reimbursement claim. He could, for example, state that his separate funds were used to benefit your marital property, thus presenting a claim that would cancel out your separate property reimbursement claim.

Other aspects of reimbursement claims that may be relevant to your divorce

You can present a claim for reimbursement for funds that were spent on a separate property asset of your spouse even before you got married. Suppose that your husband purchased some land from his parents prior to the time that you and he got married. After this transaction was completed you sold your home and netted $20,000 from the sale. That money was then used to build a home on the land that your husband-to-be purchased. The new home construction began three months before you actually tied the knot.

You then got married and moved into the house as soon as it was completed. Eventually, a divorce was filed and at the trial, the court ruled that the land was your spouse's separate property because it was purchased before your wedding date. However, it is possible for you to also be awarded a reimbursement claim in favor of your separate estate because you spent that $20,000 towards the construction of the new house.

The key here is that reimbursement is an equitable (fairness) remedy. Since the Texas Family Code allows courts to solve a claim for reimbursement usingequitable principles, it is appropriate for a court to look at the totality of the circumstances surrounding the purchase and construction of the home. Again, courts are given a great deal of latitude to make decisions like this.

What sort of evidence do you need to present in a reimbursement claim

If your intent is to succeed in a reimbursement claim then you will need to present evidence sufficient to prove that reimbursement claim. As we touched on in the outset of today’s blog post, that can be easier said than done considering how many judges are unfamiliar with these claims.

In the above example regarding community funds being used to improve the value of a separate property asset, you would likely need to show that the value of the land/property increased as a direct result of the improvements that were made. Appraisals of the property before and after the repairs are a good place to start.

I think a more common situation that we could explore in this blog post would be to talk about what happens if community resources were used to pay off a vehicle loan that was taken out by your spouse three months before you actually got married. You are now divorcing your spouse and are alleging that you should be reimbursed the amount paid to close out that loan.

This is a more complicated matter and will require that you present the note taken out from the lender that shows the date of the purchase of the loan and how much monthly payment is required. An amortization schedule can be beneficial as well and would show how much each monthly payment was and how much of that went towards principal and interest. Your testimony would be crucial to be able to substantiate these other forms of evidence. Finally, you would need to show proof that the loan was paid off. A business records affidavit signed by the creditor should suffice in this situation.

Plan your course of action with your attorney early in the divorce case

As you can see, planning out a reimbursement claim is not something that you should attempt to do a few days before mediation or a trial. You will need to speak to your attorney early on in your case in order to make sure she is aware that this is something that you intend to collect on in this divorce case. The information in this blog is the type that you would need to present to a judge.

Collecting business records affidavits from other sources can take weeks or even months to achieve. Give yourself enough time to get all of this information organized. Having it at mediation will add to the strength of your arguments. If you go into mediation without sufficient evidence your spouse may not take your claim seriously. Presenting him with all of the aforementioned evidence tells him that you are ready to act on the claim in a trial and are likely to be successful in doing so.

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Law Office of Bryan Fagan, PLLC | Houston, Texas Divorce Lawyers

The Law Office of Bryan Fagan, PLLC routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with one of our Houston, TX Divorce Lawyers right away to protect your rights.

Our divorce lawyers in Houston TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, KingwoodTomballThe Woodlands, the FM 1960 area, or surrounding areas, including Harris CountyMontgomery CountyLiberty County, Chambers CountyGalveston CountyBrazoria CountyFort Bend County and Waller County.

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