When most people think of divorce, they tend to think of some of its most well-known, and sometimes infamous, aspects. That can include matters like spousal support, child custody, and child support, which aren’t always a part of every case. More often than not, people think of divorce as a process for divvying up possessions, and determining who gets what.
Viewing divorce in terms of property is very common, and it’s very much a warranted way of looking at things. After all, married spouses, or any couple in a relationship for that matter, share a lot, especially if they’ve been together for some time. When things don’t work out as planned, it inevitably means they’ll have to decide what happens to their stuff, which isn’t always easy in every breakup.
Of course, the difficulty of dividing your things after a breakup lends to the reputation property division has earned when people hear or talk about divorce. That includes all the stories about bitter battles, bad-mouthing, and disputes over everything from businesses and bank accounts to personal possessions and pets. While it’s true property division isn’t always an easy matter to resolve, these sensationalized myths and misconceptions give many people only a partial understanding of how the process actually works – not just in terms of dividing assets like your car or your house, but also when it comes to dividing debt.
Texas Property Division 101
Before discussing how debts are divided in divorce, it’s important to have a basic understanding of how property division works. In very general terms, Texas is considered a community property state. That means, for the purposes of divorce, property is either:
- Community property, also known as marital property, which includes assets acquired during the course of a marriage which are subject to division in divorce; or
- Separate property, which is property owned by one spouse prior to marriage or received as an inheritance or gift during the marriage. Separate property is not subject to division in a divorce; however, it can lead to reimbursement claims.
These definitions are important, but property division can be a lot more complex in certain situations, such as when separate property is commingled with community property or marital property funds are used to support separate property (i.e. paying the mortgage on a home one spouse owned before marriage using community income). We discuss this concept and property division in other blogs
, but knowing the gist of how it works will be important to understanding what becomes or marital debt.
Dividing Debt: How it Works in Texas
Although many people may think of "community property" as tangible physical property they can see and touch – such as a family home or a car – it can include much more than that. Bank accounts, retirement accounts and pensions, certain aspects of a business, and other “intangible” assets can also be community property that must be divided when spouses divorce.
Because those types of assets have positive value, meaning gaining possession of that asset may be preferable or beneficial, they’re typically what most people think of when they think about property division and divorce. What they don’t usually think about is debt, including debts such as:
- A primary or rental property mortgage
- Car loans or personal loans
- Credit card debt
- Student loan debt
- Other liabilities
If you are divorcing in Texas, your debts and liabilities are subject to division just like any other asset you may jointly own with your spouse. This means you, with the help of an experienced attorney, will need to:
- Identify the types of debts and liabilities that you and your spouse have, and
- Characterize it as community debt that will be divided in some manner, or
- Separate debt that will remain in the possession of one spouse.
Of course, spouses may also have to raise or defend against disputes about marital debt, and negotiate or litigate a resolution, which are two additional tasks that demand the attention of lawyers with experience in divorce, alternative dispute resolution such as mediation or collaborative divorce, and the financial intricacies involved. Generally, however, Texas courts tend to rule that debts associated with one spouse stay with that spouse, such as in the case of student loan debt, which isn’t typically divided in divorce.
While the general rule of keeping debts and liabilities with the spouse who signed for them and accrued them may apply to some cases, it may not apply to all. In addition to marital debts spouses share (i.e. as co-signers or when purchasing necessities such as medical care and shelter), a spouse may become responsible for debts that aren’t solely their own. Awarding a spouse debt that is in the other spouse’s name can create legal issues in the future for the spouse whose name the debt is under so it’s important to consider future legal issues when discussing debt division.
Options for Dividing Debt
How debt will be divided in divorce depends on the unique circumstances involved, including the nature and amount of debts spouses have, the size of their community and separate property estates, and their own personal choices. That’s because spouses may have options for dealing with any debts and liability they have independently or together.
Common options for addressing debt in divorce include:
- Spouses may sell community property (such as a home) in order to eliminate or reduce debt prior to finalizing the divorce.
- Negotiating a larger, disproportionate share of marital assets in exchange for taking on more debt.
- Negotiating larger spousal support awards to offset a spouse receiving a larger share of debt.
- Property division settlements in which both spouses agree to take an equal share of any marital debts.
Because there are no one-size-fits-all solutions when it comes to dividing debt in a Texas divorce, the potential for significant contention, and serious implications for your financial future when the fate of debts are on the line, resolving the division of debt and liabilities is a critical part of the divorce process. At Coker, Robb & Cannon, Family Lawyers, we have the experience and resources to help.
Call (940) 293-2313 to Request an Initial Consultation
If you have questions about dividing assets and debt in your Texas divorce or would like more information about starting your divorce case, you can be confident about placing your trust in Coker, Robb & Cannon, Family Lawyers. Since 1998, our family law attorneys have been helping clients throughout Collin and Denton Counties unravel the many challenging financial issues inherent to divorce – from property division and spousal support to matters involving high net worth, hidden assets, and disputes. We also provide the insight and support clients deserve as they make decisions about their future.
To learn more about our firm and how our award-winning family law attorneys can help you, call (940) 293-2313 or contact us online to speak with a lawyer.