How do we divide our property and debts in a Texas divorce?

This page is part of our Texas Divorce Law Essentials Every Woman Needs to Know digital course.

Module 1: Property & Debts

What is Community Property?

Texas is a community property state. In Texas, unless you have a marital agreement that says otherwise, that means that any property you acquire during the marriage belongs to both of you. It doesn’t matter if only one person’s name is on a title or if only one person earns the household income. If it was purchased, acquired, or earned during the marriage, then the law says it is community property.

What is Separate Property?

The law presumes that everything is community property. But we also have separate property. Separate property is anything that was acquired, purchased or earned before marriage. It can also include inheritance, gifts, and certain types of personal injury awards, regardless of when those are acquired. The person claiming separate property has the burden to prove it.

Why is the Difference Between Community and Separate Property Important?

The distinction between community and separate property is important because our courts can only divide community property. If you have separate property, then you may want to carve that out so you can set it aside from the division of the marital estate. However, to do so, you must prove it’s your separate property. Otherwise, the default presumption is that it’s community property.

What Happens if Property is Comingled? Can I Get Reimbursed?

Sometimes, separate property and community property get comingled. Some common examples include: inherited money that is deposited into a joint bank account, separate property money is used to purchase a house during the marriage, or community income is paid into a retirement account that was started before the marriage. In those sorts of situations, you must clearly trace the separate property if you want to be able to carve it out or get a reimbursement. If you can’t, then the separate property becomes community property.

What are the Steps to Divide Property in Divorce?

There are three steps to dividing property in a Texas divorce. First, you must identify all of the marital property. You do that through inventories, credit reports, subpoenas, and discovery tools. The second step is to analyze the property and characterize it as either community property or separate property. The last step is to divide the property through negotiation or court order.

How is Community Property Divided? Is Community Property Divided 50/50?

There is no clear-cut standard for dividing marital property in Texas. Many people mistakenly believe that community property must be divided 50/50 equally, or if one spouse earns the money it belongs to them. But that’s not true. In Texas, we can divide property disproportionately so that one spouse gets more than 50% and one gets less. While there is no clear-cut standard, there are factors in our family code statute as well as caselaw, in addition to case-by-case facts and subjective fairness.

Are We Both Responsible for the Debts?

As for debts, debts acquired before the marriage remain the separate debts of the person who incurred them, unless there was some sort of transfer of liability during the marriage, like a house refinance. However, debts incurred during the marriage are not necessarily treated the same as community property. A creditor’s right to collect a debt is not affected by your Final Decree of Divorce. So, if one person is contractually obligated to the debt, then that person is responsible for ensuring that debt gets paid. Simply being married is not enough to shift responsibility for a debt. And if both spouses are contractually obligated on the debt, if one of them fails to pay their share, then the creditor can seek payment from the other person, even if the Final Decree states otherwise. For those reasons, it’s important that debts are addressed during the divorce so that terms can be negotiated or court ordered to shift or sell assets or transfer debts to ensure a fair division of the estate.

How are Debts Divided in a Texas Divorce?

When figuring out how to divide debts in a fair division of the marital estate, courts will assess when a debt was incurred, whose name the debt is in, and the nature of the debt. However, some general rules also apply. One such rule is that debts attached to an asset usually go to the person who is awarded that asset. If the debt is not in that person’s name already, then we may need to consider refinancing options, paying off the loan with other assets, or asking the creditor to allow the person to assume the loan without refinancing.

How are Student Loans Divided in Texas?

The division of student loans in a Texas divorce is a common concern for many divorcing couples. If the student loan was acquired before the marriage, it is likely to be awarded to the person who incurred the debt. However, if the loan was acquired during the marriage, then we must take a closer look at how the funds were used. If the loan was used to cover tuition, registration, books, and other related school fees, then it may be awarded to the person benefiting from the education. If the loan was used to cover household expenses like rent, groceries, gas, and other living expenses, then you may be jointly liable for the debt.

How are Credit Cards Divided in Texas?

The division of community credit card debt is one of the most common debt issues we deal with. True joint credit cards rarely exist anymore. Usually, when a couple shares a credit card, only one of them is the person contractually responsible for the card, and the other person is an authorized user on the credit card. Sometimes, dividing credit card debt is straightforward, like when the parties have maintained separate financial lives. However, most of the time, dividing credit cards is nuanced and complex, and the contractually obligated person can get stuck with the debt if they’re not careful in how it’s divided. But the general rule is that if the debt benefited the marriage, then the parties are jointly responsible for the debt, regardless of who the contractually obligated person is. And if the debt arose from one person’s personal activities, like gambling or adultery, then responsibility for the debt will belong to that person.

How are Mortgages Divided in a Texas Divorce?

Mortgages present special issues in a divorce. If both spouses are obligated on the mortgage, then it may be necessary to consider refinancing or selling the house to remove a person from the loan. If the couple does not want to refinance or sell the house, then some banks may consider an assumption of the loan to one person, or the couple may agree to remain jointly liable for the mortgage. The latter option is not advisable, as it can have a significant impact on a person’s credit, especially if the mortgage is defaulted on or foreclosed after the divorce. If only one person is on the mortgage, and that person wants to keep the house, then that person may need to figure out how to pay out any equity interest to the other person.

How are Car Loans Divided in a Texas Divorce?

Car loans, like mortgages, are a type of secured loan, and are treated similarly. The biggest difference is that car loans are usually smaller amounts than mortgages, so couples may be more willing to work out agreements on how and when those loans get paid. But the general rule is that the person keeping the car is responsible for the car loan, and if they can’t afford it, then they may have to refinance the loan or sell the car.

Why Should I Review My Credit Report?

Reviewing a copy of your credit report during your divorce is a good idea that most people skip. A credit report is not the same thing as a credit score. A credit report is a detailed account of your credit history and lists all the debts in your name, whereas a credit score is a three-digit number signifying your credit worthiness. During a divorce, your credit report is more important than your credit score. After a divorce, your credit score will affect your financial future. It’s a good idea to request a copy of your credit report at the beginning of your divorce and again at the end of your divorce. At the beginning of your divorce, you should use the report to itemize all debts that need to be addressed and check to see if your spouse secretly hid debts in your name. At the end of the divorce, you should make sure that information was removed as agreed or court ordered and that you ex’s debts are no longer in your name. If you don’t already have a credit reporting service, every American citizen can get a free copy of his or her credit report from each of the three major credit reporting agencies every year at www.annualcreditreport.com.

Can I get my ex’s Social Security benefits?

Social Security is not an asset of your marriage, and it cannot be divided in a divorce. As such, they are a separate issue, and it is not necessary to address them in the divorce or the Final Decree of Divorce. However, it is possible to apply for your ex’s benefits, and if you are eligible, then it may be relevant to your financial planning and how you approach the division of your marital estate in negotiations. If you qualify, you cannot double up and claim both your benefits and those of your ex, but you can elect the higher of the two. And your claiming benefits should not affect your ex’s benefits, but it may affect the benefits of any of their future spouses. You can learn more on the government website, ssa.gov, or speak with a financial planner.

Can I get my ex’s Veteran’s Disability Benefits?

Like social security benefits, VA disability benefits are not marital property that can be divided in a divorce. However, VA benefits may be considered in calculating child support or spousal maintenance and alimony.

Course Navigation:

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