Deciding how to divide property in divorce is one of the most significant decisions that a divorcing couple in Texas will need to take. But while couples often fight over assets like the house or a retirement account, far too many take too little time deciding how to divide marital debt. If you and your spouse are ending your marriage, it is crucial to contact an experienced divorce attorney to help with this painful and complicated process.
Although dividing debts is not the highlight of any divorce, the importance of doing so cannot be overstated. For many couples, marital debt outweighs the net value of their assets. How these obligations and liabilities are split will affect you long after the divorce is finalized. That’s why you need the experienced family law team of Youngberg Law Firm.
The Basics of Property and Marital Debt Division in Texas
The marital estate comprises all assets, debts, and liabilities arising from a couple’s marriage. At the time of divorce, these all need to be divided between the spouses. Texas is a community property state, which means that all property and debts acquired during the marriage will generally be considered jointly owned by the spouses. In Texas, the phrase “community property” is used to describe this. It is distinguished from separate property, which is owned by one spouse prior to the marriage or received as an inheritance or gift.
Anything that is classified as community property is subject to division; separate property is not. Community property can include tangible assets like real property and vehicles, or it can include intangible assets like bank accounts, retirement benefits, business interests, and more. Debts that are acquired during the marriage will also need to be divided, and determining this division is often not as simple as which party incurred the debt.
Some examples of debts that must be addressed during the divorce include:
- Mortgage on a primary or rental home
- Automobile loans
- Credit card debt
- Personal loans
- Medical debt
- Student loans
How Is Marital Divided?
In most cases, a debt that is associated with a particular asset (for example, the marital home or one of the vehicles) will be distributed to whichever spouse ends up with it. The same is usually true when debts are incurred in the name of solely one spouse. For the most part, therefore, if your name is on the debt or you are given possession of the property that carries the debt, it will be your responsibility.
This rule is not always true. In Texas, you can become liable for debts incurred by your spouse in one of two circumstances:
- Your spouse acted as your agent
- Your spouse took on debt for “necessaries”
In order for your spouse to be considered your agent, there must be something more than just the marital relationship. You must have specifically given your spouse the authority to acquire that debt on your behalf.
There are not many cases in which the agency argument above would be an issue. The more common way in which a spouse can be responsible for the other spouse’s debts is when necessaries are involved.
What Is a “Necessary”?
Every family is different, so what is considered a necessary item in one case may not be in another. Generally, however, the following are seen as necessaries:
- Medical care
There are exceptions, especially with respect to medical care. Cosmetic procedures, for example, may not fall under this category. But to the extent these and other items were necessary to live, it is possible for you to be responsible for debts incurred to obtain them. If there are debts for necessaries in your case, it’s important to discuss them with a knowledgeable Texas family law attorney.
Options For Dividing Marital Debt
Going to court is expensive, and your creditors are generally not bound by divorce decrees. Therefore, it’s a good idea to try to work with your spouse in managing and eliminating as much marital debt as possible.
These are some possible solutions for doing so:
- Sell the joint property you and your spouse own – such as the family home or vehicles – to pay off the outstanding marital debt
- You may be awarded a larger share of assets in exchange for taking on responsibility for more marital debt
- Your spouse may be awarded a larger share of assets in exchange for the debts
- Either you or your spouse can negotiate higher spousal support payments in exchange for taking on responsibility for more marital debt
- Both spouses split all debts and assets evenly, with both taking on exactly half the debt
What About Creditors?
Since creditors are usually not bound by marital debt divisions, the failure of one spouse to pay a debt can have negative implications for the other. For example, let’s say you and your spouse both signed the home loan. During the divorce, your spouse agrees to be responsible for making those mortgage payments. If your spouse doesn’t pay, the lender can pursue either spouse whose name appears on the loan paperwork. This is true regardless of what was done in family court. The results could be damaging for your credit, and therefore your ability to acquire loans and mortgages in the future.
There are solutions for this, such as contempt of court. However, it’s important to act as soon as you learn that the spouse responsible for the marital debt has dropped the ball. A contempt action may not repair your credit but it can compel the other party to make the payments they agreed to.
Contact a Texas Marital Debt Attorney
Marital debts are complicated, and managing them during a divorce requires diligence. Failure to adequately focus on this part of the divorce could have severe repercussions for you for years to come. Let Youngberg Law Firm answer your marital debt questions and give you the peace of mind to move forward from your divorce. Call us today to schedule a consultation.