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How do you divide debt in a divorce in Texas?

On Behalf of | Jun 12, 2024 | Property Division |

Dividing assets is often one of the first things people think about during a divorce. However, liabilities or debts are also important to consider.

These responsibilities can affect a person’s future financial stability. Because of this, couples need to prepare for the division of debt before making the split official.

Community debt versus separate debt in Texas

In Texas, the court may classify debt as either community debt or separate debt. Community debt refers to obligations the couple jointly incurred during the marriage. For example, credit card debt that they accumulated on a joint account falls under community debt. Even a car loan with just one spouse’s name on it could be community debt if both used it or used family funds to pay it off.

Both spouses share responsibility for community debts. The court will divide these liabilities between both parties in a way it deems fair. However, this does not mean a mathematical 50/50 split, as the court takes into account various factors. Alternatively, the couple can reach an agreement on how to split these expenses.

Separate debt includes obligations one spouse incurred before the marriage or after separation. Typically, the other spouse would not have used or gained any benefit from the item. To prove that something is separate debt, a person must provide clear evidence, such as receipts or bank statements.

Options for dividing debt in a Texas divorce

Different options exist for dividing debt during a Texas divorce. One common choice is an equal split. Both parties agree to take on half of the total debt. Another option involves selling property to pay off shared debts completely. This method can reduce ongoing obligations and disputes.

Couples could also assume different debts that do not necessarily have equal values. For example, one spouse might take on a mortgage while the other handles credit card balances. Child custody arrangements can also influence debt division. The parent with primary custody might assume more household-related debts.

Also, a spouse could take on more debt to balance out asset distribution. For instance, if one spouse keeps a car and its loan, this affects the overall division.

The rules for dividing debt in a divorce follow similar principles to those for dividing assets. To achieve a fair split, the couple needs to look at the entire financial picture. This approach can ensure a balanced outcome for both parties.