By Curtis Harrison
Because Texas is a community-property state many people assume that debts incurred during the marriage constitute “community debt,” thereby automatically obligating both spouses personally for those debts. Even many lawyers and judges believe that this is how Texas law functions. In reality, there is no such thing as community debt. The real issue boils down to identifying the type of assets that can be attached by a creditor to satisfy a particular debt.
Let’s take the straight-forward questions first: Are you personally liable for your spouse’s pre-marital debts? No, unless you added yourself as a joint account holder on the account at some point. Examples of this kind of obligation could include old credit card debts, student loan obligations, mortgages on real estate your spouse owned before marriage, and child support obligations from prior relationships.
What about jointly-held obligations incurred during the marriage? This is another clear, if not comforting, answer: If you joined in the transaction giving rise to the obligation or if you jointly own the account, then you are clearly liable for the obligation. Common examples include a home mortgage, a jointly-owned credit card account, or a car loan that exists in both spouses’ names. Even if you were married outside of Texas or lived outside of Texas during the marriage, once you moved to Texas then Texas law applies to you.
Are you liable for a debt your spouse incurred by himself or herself during the marriage? The answer becomes a little more complicated if the debt was incurred individually by a spouse during the marriage. The answer is, “It depends.” You have less potential exposure for your spouse’s individual contract-based debt than you would face for an obligation brought about by your spouse’s negligent or intentional misconduct (tort-based).
At this point it becomes mission-critical to properly characterize the asset(s) in question because Texas law makes a distinction between “separate property” and “community property.” Separate property is comprised of personal injury awards, property that you owned before marriage and property that was given to you during marriage. Everything else acquired during the marriage is considered community property by default. This could include income, cash, cars, houses, retirement, stocks, and virtually all other assets you have accumulated over the course of your marriage.
As a general proposition, your separate property is immune from the individual debts incurred by your spouse, regardless of whether the obligation is contractual or tort-based. However, without proper planning, some or all of your share of the marriage's community property can potentially be levied against to satisfy an adverse judgment against your spouse.
There are additional potential pitfalls beyond the scope of this article, such as tax obligations, which should be discussed with your attorney. The good news is that your attorney can help you minimize your financial risk and exposure with a well-crafted pre-marital or post-marital agreement. Albin, Yates, Balius & Roach is a full-service transactional and collaborative law firm dedicated to helping people avoid legal conflicts when possible, and resolving them efficiently and effectively when such conflicts are unavoidable. Please contact us for more information at www.ahrlawfirm.com .
