Dividing debts in a Texas divorce can be just as complicated as dividing assets. Texas, as a community property state, divides debts according to the same principles that govern asset division.
However, exceptions exist, and the way the court divides debt can impact both parties’ financial futures.
Community vs. separate debts in Texas
In Texas, debts are classified as either community or separate. Community debts are those incurred during the marriage and usually get divided equally between spouses. Separate debts are those accumulated before the marriage or acquired by one spouse through inheritance or a gift. The spouse who owns separate debt is generally responsible for repaying it.
For example, if one spouse takes out a loan before the marriage, that debt remains separate, and the spouse who took the loan must repay it. However, debts acquired after the marriage, such as credit card debt, mortgages, or car loans, typically get divided between the spouses.
How debts are divided
When dividing debts, the court considers the overall financial situation, including both assets and liabilities. While the goal is to achieve fairness, equal division of debt doesn’t always mean an equal split. One spouse might take on more of the debt to balance out the division of assets.
Sometimes, a spouse may agree to take on more debt in exchange for receiving a greater share of the marital property. The court might also assign responsibility for specific debts to one spouse, especially if the debt relates to certain property, like a home loan.
Debt responsibility and credit ratings
Debt division can impact your credit score, especially if you or your ex-spouse fails to make payments on a shared debt. A missed payment can harm both spouses’ credit ratings. Clearly defining responsibility for debt in the divorce settlement is crucial.
Understanding how Texas divides debts is key to securing your financial future, whether you are currently going through a divorce or just considering one.