How are Debts Divided in Divorce?
In a divorce, all marital assets and debts are divided according to state law. States either follow equitable distribution or community property laws. Most states follow equitable distribution laws, but that is not the case for Texas.
Texas is one of nine community property states. What this means is that any property acquired by a couple during their marriage is equally owned by both spouses. It does not matter who paid for it or whose name is on the title or account. If it was purchased between the date of marriage and the date of the divorce, then it is considered marital property. The only exceptions are gifts, inheritances, and personal injury settlements. These are considered separate property and are not subject to split in a divorce in Texas.
So how are debts divided? They are not necessarily split equally. Car loans, mortgages, credit cards, personal loans, student loans, medical debts, and other liabilities are split fairly, but not necessarily 50/50. While both spouses are responsible for the debts and liabilities of the marriage, how they are split depends on the circumstances of both parties.
Dealing with contracts and titles can be tricky, and the court does not have the authority to remove parties from auto loans, mortgages, and credit cards. What this means is that while the court can award the car to one spouse, for example, the creditor can still look to the other spouse for payment.
When deciding who gets which debts, the court will look at factors such as:
- Each party’s financial standing
- Each party’s business opportunities and earning capacity
- Each party’s age
- The size of each party’s separate estates
- The type and nature of the debt
If one party has a much better financial standing, then they will likely be on the hook for paying most of the debt. A stay-at-home mother who barely worked would likely not be ordered to pay much of the debt.
Final Divorce Decree
The final decree of divorce shows how all assets and debts are split. It will show all the community property that each spouse will keep. It may order that certain community property (such as a house) be sold. The decree also lists the separate property of each spouse.
The final decree of divorce also lists the debts each spouse is ordered to pay and orders that any retirement benefits that a spouse has are either given 100% to the spouse who earned them or divided between the spouses.
Contact Our Texas Divorce Attorney Today
It is important to understand property division laws in a divorce. Each state is different and you want to ensure you receive what you are entitled to when your marriage ends in Texas.
Have questions about property division? A Texas divorce attorney John Powell III, P.C. can help you make the right decisions. We work to negotiate fair resolutions that allow our clients to move forward with as little pain as possible. To schedule a consultation, call 832-850-6095 or fill out the online form.