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How to untangle your debts during divorce

When talking about a divorce many people consider issues related to their children in their property as being the ones that deserve their most attention. I cannot disagree with this thought especially in regard to your children. If you are a parent going through divorce, then your primary focus should be on doing what is in the best interests of your children and working to maintain your relationship with your child both during and after the case. I am a parent, as well. I know that if I were going through a divorce my first Anne last focused on the case will be in relation to my children. This is the reality: everything else would take a backseat to my kids. 

By the same token, I cannot tell you that it is a good idea for you to focus only on your children during the divorce. There are other elements to divorce cases which are important in which require your attention. This doesn't mean that your children will get any less of a focus for that children are going to suffer as a result of you're paying attention to other issues in your case. What it does mean is that many areas of divorce are not discussed a great deal in our culture and maybe issues that you have not thought about once at all while you have been planning for your divorce case.

One of those issues which is important yet not widely discussed in relation to a divorce is that of marital debt. Not only is it important because debts are divided in divorce but because people are more comfortable and in positions where they feel the need to take on debt in today's world than in generations past. I understand that debt is not a pleasant subject to discuss and that many of you may have large amounts of debt which will need to be cleared out in sorted through in your divorce. However, just because something is not pleasant to talk about does not mean that you can set it to the side and ignore its presence in your life. 

Rather, you can use the divorce as a great opportunity to go through debts, determine if those debts need to be divided in the divorce and then begin to negotiate with your ex-spouse on how to do so. In many ways, a silver lining of your divorce is that it will force you to come to grips with your debts and devise a plan to sort them out. The shortest path between you and a degree of financial success is to focus on your debt and work on eliminating it. While it may be difficult to eliminate debt during a divorce you can certainly focus on it and devise a plan on how to do so in the future. 

A comparison that I will use in describing a divorce two people is like when you have a messy home and have been trying to avoid, as best you can, putting in the work to clean that house. I know many times in our busy lives we can look at our house and think to ourselves that we need to clean this room or that 1, it's just that other life events get in the way and keep us from cleaning the house as we would like to. I have learned, and I think my wife will second this opinion, that if cleaning the house has been a problem the best thing to do is too invite friends and family over for a party. that may seem counter intuitive, but I will explain why it makes sense. 

Think about it this way: if you have avoided cleaning your house one of the major reasons why is because you and your family have become comfortable with the mess. It's not like you have to show other people to mess when only you all are living in the home. A great way to remove this comfort level with the mess is to put yourselves in a situation where you know people are going to be coming over on a certain date at a certain time. This forces you and your family to devise a plan on how to clean the house by that date and time and then work to get that goal accomplished. You know that, at the end of the day, if your house isn't clean other people are going to see the mess. 

Divorce in debt is a lot like that. While you may have been drifting through life without much of a plan on how to deal with your debt, the divorce that has been filed suddenly puts you in a situation where you have to focus on the debt for the good of your case. Simply focusing on the debt will force you to create a plan to both organize and pay down the debt in the coming years. Again, I am not suggesting that this is going to become a fun activity or anything close to it. However, I do think that there is merit in getting your life organized and an adverse situation like a divorce may be just what the doctor ordered as far as putting you in a position to do so.

This is the backdrop for today's blog post from the Law Office of Bryan Fagan. I am going to walk you through how to get your life untangled from debt during the course of your divorce. While each of you reading this blog have various levels of debt to your name the tips and information, I'm going to share with you will hopefully be generally applicable across the board. I am not suggesting that every one of you go after your debts in the same way as my family has. What I am recommending is that each of you at least become organized and aware of what your debts are so that you are better able to untangle yourself from debt and begin to build wealth in the years after your divorce.

Look at your credit report and figure out what debts you have 

The first step that I would do, when it comes to organizing your life and your debts, is to pull your credit report and see what open accounts are in your name. There may be some negligible cost associated with pulling your credit reports from one of the three credit reporting agencies but in this case the money you spend doing so will pay dividends for you on the back end. This is especially true if you come to find out that you have debts in your name that you were unaware of. Depending on your age and your involvement with debt in the past it is very possible that you have accounts that you have forgotten about or that were opened in your name without your knowledge by your spouse. 

Once you have requested a copy of your credit report it is time to sit down and take a look at all of your debts. The way that you organize your debts is up to you. You can organize them by type or simply organize them one by one starting with the smallest debt and working your way up to the largest debt. The types of debts that you have made depend on your age. People of a certain age may have substantially more credit card debt than people of another age, and younger people may have more student loan debt than any other type of debt. Different generations have different views on debt and their willingness to incur debt. 

Determine the dates on which the debt was created 

It is important for the context of a Texas divorce To take note of when the debt was opened up. Less important is whose name appears on the debt. However, in your marriage you need to know that debts are divided up much in the same way as property. Texas is a Community property state and debts in property will be divided up based on whether they are part of the community estate or are part of one of your individual separate estates. Separate property debts are not divided up in the divorce. These would be debts that were in curd prior to your marriage. Community property debts are those debts that were opened up during the course of your marriage. 

A question that I get from time to time has to do with how student loans are divided. In a divorce, it is more likely than not that your student loan will follow you after the divorce. This means that it is unlikely that your student loan debt would be made to be part of your spouse’s share of the Community property. However, that does not take into account every possible scenario for your case and your individual circumstances may allow for your student loan debt to be divided in some part between you and your spouse. I don't think this is likely, but I wouldn't completely rule it out either. 

For the most part, I am envisioning scenarios involving you and your spouse having incurred debt related to your home, credit cards and other consumer debts like vehicles. You will need to determine when these debts were incurred, and if they were incurred during your marriage, they will need to be divided up in the community estate division. The degree to which each of you owns separate property, your future financial prospects, education an ability tool and employment after the divorce are all factors that a judge would consider when dividing Community property debts between you and your spouse. 

Divide the debt- and make sure you get it all

The final step in the process is to divide up your debts, make sure all the debt is divided and then keep an eye on the debts after the divorce. It is likely that you and your spouse will negotiate Your way through the divorce rather than have a judge decide the issues for you. This means that the pressure is on both of you to work together and set aside your differences to come up with solutions that work well for you and your family. If you are unable to do so it is then that a judge would have to divide up your community estate plus your debts in a trial.

However your divorce is resolved, either through negotiation or in a trial, you need to make sure that both you and your spouse have come forward with all debts so they can be divided up in the divorce. It is not sufficient for you to merely trust that your spouse discloses all debts that you may be partially liable for. Especially when a debt is in your name then you need to put that debt forward. Going through the process of discovery and then double checking against your credit report is the best way that I can think to do this. 

Keep in mind that there is no going back when it comes to debt in your divorce. If you miss a debt and end up becoming liable after the divorce on something you were unaware of during the divorce case itself you would not be able to reopen your divorce just to tackle a debt or two period that is why you need to be absolutely sure that all debts have been put on the table and responsibility for those debts has been made apparent in your final decree of divorce. If it is possible for a refinance of a particular debt to occur so that your name can be removed from the debt you should think about trying to have that sort of language inserted into the decree as well. 

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 this blog post today please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultation six days a week in person, over the phone and via video. These consultations are a great way for you to learn about Texas family law as well as the services that our law office provides to our clients. 
 

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