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How Is Debt Divided in a Divorce?

When spouses divorce, many are concerned about how their property will be divided. In a Texas divorce, marital property is split according to community property principles, which includes addressing debts accumulated during the marriage. Austin divorce lawyer, Catherine Benouis, explains the process of dividing debt in a Texas divorce.

Community Property and Debt

Texas is a community property state, which, according to state laws means that any property acquired by a couple while married is owned by the couple collectively as their community estate.

Under this system, there are three types of property – separate property, community property, and mixed character property:

  • Separate property: All property solely owned by one spouse before the marriage, gifts or inheritances acquired at any time, and proceeds of personal injury lawsuits (with the exception of compensation for lost wages).
  • Community property: All property acquired during marriage by either spouse regardless of the name on the title document of the property.
  • Mixed character property: Property acquired partially by a separate estate and partially by the community estated.

Essentially, money earned by either spouse during the marriage and all property bought with those earnings is considered community property. Additionally, community property includes debts incurred during the marriage, meaning both spouses are liable for those debts.

Problems with Debt After Divorce

When splitting community property, the court does not require an equal split. In most cases, the court will rule that whichever party was responsible for acquiring the debt will likely be the one liable for paying it back. However, creditors can only pursue the person whose name is on the debt. That means if both spouses are named on the title of the loan, bill, credit card, etc., both will be responsible according to the lender or creditor.

This can lead to several problems post-divorce. If your spouse states that they will handle certain payments but miss one or stop making them completely, you could be held liable for it. This could lead to a decrease in your credit score which can impact your future interest rates or approval for loan applications.

It’s imperative that you determine all of the debt that you and your spouse have to divide in a divorce

Because there are serious issues that come with dividing debt in a divorce, it’s essential to work with a skilled Austin divorce lawyer. If you are going through a divorce or about to begin the divorce process, and need assistance with appraising your assets and liabilities, reach out to Benouis Law to set up a consultation with our Austin divorce attorney.

Call our skilled Austin family law firm today at 512-764-3932 to find out how we can help you.