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When debts become marital property

In the context of a divorce most every person going through that process thinks about property and finances as being the most important 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 divorce is to protect their property and two do so with the least amount of harm done to themselves as possible. 

However, it is important to note that you cannot only think about property when it comes to dividing up your marital estate in a Texas divorce. You also need to concern yourselves with debts in liabilities in your financial lives. This is going to be the focus of our blog post today. I would like to share with you some information about property division in a divorce, your community estate and how it could be divided and how debts in your marriage play into both subjects. Basically, if we think about property a great deal when it comes to divorce my point would be that in today's day and age, we need to think about debts just as much. This is true even if thinking about the debts 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 will involve taking property and debts that are owned or owed by you and your spouse and dividing it between the two of you. The devil, as they say, is in the details. How you and your spouse, or a family court judge were to come to that, 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 we can discuss any other subject in relation to your divorce, we need to be clear on how property is actually divided in a Texas divorce case.

if you and your spouse are able to work together in 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 unconscionable in the opinion of your family court judge. Keep in mind that a judge will review your final decree of divorce prior to signing it. You or your spouse will also need to appear before that judge in order 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 completely 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 really apply. This allows you all to create your own Reality when it comes to property and debt division. Of course, this means that you and your spouse would need to be able 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 are unable to work out a division of your property and debts with your spouse a judge would need to intercede and determine how property was going to be divided. This process is otherwise known as a divorce trial. Both you and your spouse would be able to set forth evidence in a trial to show a judge just how I believe property and debts ought to be divided. At the end of the trial the judge would make a decision as to how property and debts between the two of you should be divided based on community property law. 

What is Community property law in relation to a Texas divorce? 

Texas is one of thirteen American states that adheres to principles and laws regarding Community property. What this means is that property acquired by you and your spouse during the course of your marriage is presumed to be owned as Community property. It does not matter whose property and it does not matter whose name appears on a receipt or title for that particular property or debt. If the debt was taken out or the property was purchased during the course of your marriage, then 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 debt or owned a piece of property prior to your marriage then that property or debt will be part of your separate estate. The same will be said for your spouse. Separate 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. 

Much of the time, community property states end up allowing for spouses who do not work outside the home to retain a more equitable share of that marital estate then perhaps they would have in a state 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 have been purchased during the course of 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 true. For example, the mortgage debt on your home may not bear your name but if it was taken out during the course of 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 the 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. Keep in mind that community property, as I had referred to it earlier in today's blog post, 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 on a daily basis. 

When I am referencing debt, I am referring 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. For my experiences as a family law attorney it is these debts that are the most prevalent and most common among our clients and our clients spouses. As a result, your lawyer and you 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. 

The most commonly utilized rule in Texas for dividing debt in a divorce is that whichever spouse signed for the debt or incur the liability, that is the spouse that will end up with that debt or liability after the divorce. It is certainly possible that you could become responsible for a debt or liability that was not signed for solely by you. Judges are aware that if they were to award you a debt that was in your spouse’s name that this can be an issue in the future for your spouse given that he or she would actually 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 it comes to dividing the debt in your divorce. Of course, your individual circumstances will play a large role in determining how this deck can be divided. Specifically, the kind of debt that you are liable for and the number of debts that you have on your ledger will be relevant to this discussion. In addition, the size of your community estate in general level of wealth will determine how many options you all have in front of you to decide from. 

When it comes to the family home this is likely to be your largest asset in the divorce. By the same token, it is also likely to be your largest 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 Then The spouse who takes on more debt in the divorce could be awarded a greater share of the community estate to equalize their taking on that liability. 

In the event that you and your spouse have been married for longer than 10 years, spousal support may be awarded guess who takes on a greater share of the debt in order to equalize the financial burdens between the two of you. Finally, the most logical and simplest 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 that are owed. This solution works best when both you and your spouse earn similar amounts of money. 

Keep in mind that what solutions work in regard to debt for one divorce may not work as well for your divorce. For instance, in your neighbors divorce the husband may have stayed in the marital home and simply refinance the mortgage in order 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 though 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 then 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 in regard to matters like these so that the full extent of your circumstances can be considered. 

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 a great way for you to learn more about Texas family law as well as about the services that our office provides too clients that work with us. We take a great deal of pride in serving our community and hope to be able to speak to you about how we could do the same for you and your family. 


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