What Happens To Debt In A Divorce?

Divorce is a complicated process, but most people are aware of the effects of divorce on the most obvious aspects of a marriage: the marriage itself, kids, and property. A divorce legally ends the marriage. The divorce decree divides child custody and child support between the now-former spouses. And someone gets to keep the house, or it is sold and the proceeds split between the parties. But what about any debts?

Like most other assets and liabilities, debt is split between the parties. This often happens in straight-forward ways. A divorce decree or mediated settlement agreement, for example, commonly assigns debt from credit cards to one party or the other. In community property states like Texas, it does not matter whose name is on the card or account. If the debt was incurred during the marriage, then it is community property and subject to division between the parties.

Debt allocation also happens in less obvious ways. Texas courts are charged with separating the marital property in a just and right manner. The first step for real property—like land interests, and personal property—like cars, is for the court to calculate the equity value of the property. The equity value is essentially the fair market value minus any debt still owed on the property such as a mortgage. It is this equity value that the court divides between the parties, and this is true for all property. So in reality, every property division also divides debt. This carries immense ramifications in your life post-divorce as you could be saddled with your ex’s high-interest debts.

If you are contemplating divorce, or if you are concerned your spouse may be contemplating divorce, you need a team of highly experienced divorce litigation attorneys knowledgeable about asset division who will zealously fight for your rights. Contact Kirker│Davis LLP to schedule a meeting with a divorce litigation attorney today.