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How Is Debt Divided in a Texas Divorce?

According to a 2018 study, the average American has more than $38,000 worth of debt. With the recent pandemic and economic challenges our country faces, experts estimate that the number has increased significantly in 2020. So, what does that mean for divorcing couples in Texas? How is debt divided, and what should you do if you and your spouse are considering divorce with debt?

How Texas Courts Divide Debt

If you and your spouse agree on how to split your debt, the judge will likely approve your agreement. However, if you can’t agree, the court will decide how to divide the debt. In Texas, courts divide property and debt using the community property method. This means that the property acquired—and the debt that accrued—during your marriage belongs to both you and your spouse.

For debt that’s considered community property, Texas law requires the court to divide the debt fairly and equitably. The only property or debt not eligible for division is separate property—property or debt that you or your spouse had before the marriage or that meets certain criteria.

Your Divorce Decree Doesn’t Affect a Creditor’s Right to Collect

You should know, however, that your Final Decree of Divorce does not affect a creditor’s right to collect a debt from you. Even if the judge orders your spouse to pay a debt that is in both your names, the creditor may still come after you for the debt if your spouse does not pay.

For example, if your car loan is in both of your names and your spouse keeps the family car, they must refinance the car loan to get your name off the debt. If your spouse is unable or unwilling to refinance the loan, and then they stop paying, you will be responsible for the debt—even though you no longer drive the car. Talk with your lawyer about how to prevent this from happening to you.

Types of Debt to Consider

Be sure to consider all of your debt when making financial decisions about your divorce. These decisions can have a serious impact on your future, so it’s important to review all the details carefully.

Most Americans have some combination of these forms of debt:

  • Credit cards
  • Student loans
  • Mortgages
  • Car loans
  • Personal loans

Dividing Debt: Paying Off Debts From Your Marriage

There’s no one-size-fits-all solution for dividing debt in a Texas divorce. Depending on your situation, you and your spouse may choose to sell the family home and vehicles in order to be free of the debts associated with them.

If you don’t, you could be responsible for debt that you cannot pay—especially as the income that supported one household must be stretched to support two. After your divorce, be sure to check your credit report and note any discrepancies. Talk to your attorney about anything that concerns you.

If You’re Worried About Marital Debt, Talk With a Lawyer

If you are considering a divorce and have debt, it’s a good idea to talk with the lawyers at the Schneider Law Firm, P.C., as soon as possible. Talking with us early in the divorce process can help protect your interests and keep your options open.

Call us at 817-799-7125 to get started. Consultations with our attorneys are confidential. We’ll talk with you about your options and help you understand what steps to take to manage debt and divorce.