What happens to your property and debt in a Texas divorce?

What happens to your property and debt in a Texas divorce?

On Behalf of | Oct 22, 2021 | Divorce |

Filing for divorce means making major changes to your life. The goal of the process is to separate your life and finances from your spouse’s. That is often easier said than done, especially if you have stayed married for some time.

You and your spouse likely have a substantial amount of shared property, as well as some shared debts. The two of you will either need to settle the property division arrangements yourselves or litigate them and have a judge decide what will happen.

Understanding the Texas approach to property division can help you negotiate a settlement or fight for a fair outcome in court.

Texas is a community property state

When a couple divorces in Texas, they either settle matters collaboratively outside of court, apply a pre-existing marital agreement to their property or have a judge interpret state law and apply it to their circumstances.

The law of the land in Texas is to treat your assets acquired during the marriage as community property. Any income you earned or items you purchased belong to both you and your spouse. That same rule also applies to the debts you accumulated while married. The two of you will have to split everything that is part of the marital estate.

Both property and debts from before your marriage may remain separate property that you don’t have to split. Inherited assets and gifts may also be separate property not subject to division. Everything else, from your individual retirement accounts to your house and student loans may have to get split up in the divorce proceedings.

You don’t have to literally divide every asset

There are ways to potentially split even the most complex assets. There are special documents that can let you divide a retirement account without incurring early withdrawal penalties. One spouse can refinance the house to pay the other half of the equity in it. Each spouse could take half of the household debt.

However, many couples find that a better solution is to not split everything but rather split their value. One spouse might keep more property and also assume more debt. One spouse might keep the house, while the other keeps the retirement account. What matters is that all marital assets in debt get divided properly between spouses.

Learning about the Texas approach to property division will make it easier for you to plan for your upcoming divorce.