Dividing Debt During a Divorce

Asset Division

Dividing debt during divorceWhen you are planning to file for divorce in Texas, or you are anticipating a Texas divorce, you should gain a clear understanding of how property division works. Under the Texas Family Code, Texas is what is known as a “community property” state. Accordingly, nearly all property acquired after the date of marriage — unless it is excluded from this classification — will be deemed community property and will be subject to distribution in a divorce.

As the Texas Family Code explains, community property “consists of the property, other than separate property, acquired by either spouse during the marriage.” The statute further clarifies that separate property consists of any property owned by either spouse prior to the date of the marriage, property “acquired by the spouse during marriage by gift, devise, or descent,” and property recovered by one of the spouses as a result of a personal injury claim.

Under Texas law, there is a presumption of community property, which means that “property possessed by either spouse during or on dissolution of marriage is presumed to be community property.” Even though many states consider property from the marriage to include assets and liabilities, Texas law views debts from the marriage somewhat differently. We will explain in more detail below.

Community Property Divided in a Manner That is Just and Right

The Texas Family Code makes clear all community property must be divided in a manner that is “just and right” when taking into account both spouses’ circumstances. Courts in Dallas and elsewhere in Texas can consider several different factors in determining how to divide community debt, including but not limited to:

  • Financial circumstances of each of the spouses;
  • Age of both spouses;
  • Children from the marriage who are being provided for by the spouses;
  • Education and earning capacity of both spouses; and
  • Fraud on the community (meaning a situation in which one of the spouses unfairly lost or dissipated community property in advance of the divorce proceedings).

What does this have to do with debt? For most parties, community property involves assets from the marriage, and the above helps to clarify how those are divided. Yet liabilities are handled somewhat differently. While debts from the marriage are “marital” or “community” property in some states, things work a bit differently in Texas.

Spousal Liabilities Under Texas Law

Under the Texas Family Code, a spouse is only personally liable for the other spouse’s incurred liabilities if one of the following is true:

  • Spouse who incurred the liability was acting as an agent for the other spouse; or
  • Spouse incurred a debt for family necessities.

The Texas Family Code underscores that “a spouse does not act as an agent for the other spouse solely because of the marriage relationship.” Then, both spouses are only liable for debts incurred during the marriage in limited circumstances.  Even so, a divorce court may certainly consider all liabilities and ordered them paid by a particular spouse.  But it is important to remember that spousal liability for incurring debt can still be true even if a court divides that debt differently.

Learn More by Contacting a Dallas Divorce Lawyer

If you are planning for divorce or need more information about the division of community property in Texas, one of our experienced Dallas divorce attorneys can assist you. Dividing debt is one aspect of the division of community property in any Texas divorce, and it is important to understand how the process will work in your case. Contact Orsinger, Nelson, Downing & Anderson, LLP to learn more about the services we provide to clients in Dallas, Frisco, Fort Worth, and San Antonio.