It is a simple truth that part of ending a marriage deals with money. The ledger sheet in a Texas divorce is not restricted to dividing the couple’s assets. Debt division can be even more important, because courts divide both assets and debts during a divorce.
Texas is one of the community property states where both spouses are responsible for all the debts accumulated during marriage regardless of how the debts were held. For example, both spouses are liable for a credit card balance even if it was secretly accrued by only one spouse.
Spouses can try to divide their credit card debt into separate accounts. Credit companies may not always divide this debt but will usually agree to open a new account in one spouse’s name if they have good credit. A balance transfer card may also help divide this debt if one spouse receives approval from the credit company.
Mortgage debt is like credit card debt but it involves an asset, because the couple’s home secures this debt. If the spouses own their home together and the debt is in both of their names, one spouse can usually keep the home. The mortgage company must approve that spouse’s refinancing of their home in their name.
There are also several ways to divide any equity in the home. The spouse who keeps the house can purchase the other person’s equity with cash. The home can also be refinanced for its worth to get cash out.
One spouse may also get a home equity loan and use some of the cash proceeds to give the other spouse a share of equity. Or, the proceeds of a sale of the home can be divided between the spouses.
Auto loans are approached in many ways. Each spouse usually keeps their own car and assumes its loan payments. Spouses, however, should consider refinancing the loan on their own names to avoid sharing joint debt.
Student loan debt is usually kept by the spouse who took the loan. However, the spouses may agree to divide student loan payments as part of a general settlement.
Agreement does not necessarily end problems. A spouse may not hold up their payments and the other spouse may face collection actions for joint debt.
It is important that spouses seek fair and reasonable divorce decrees dividing property and debt. In the end, it is important that, just like the division of assets is fair, so is the division of debt.
Source: WiseBread, “What happens to debt after divorce?” By Holly Johnson, March 30, 2018