Here is another excellent blog post done by Michelle O'Neil (Dallas, Texas) a few years ago on how Texas handles debts in the divorce process.
Debt in Divorce
An excerpt from my book, Basics of Texas Divorce Law on debt division in divorce:
To determine liability for a debt as between spouses, there are two inquiries – which person may be liable and which assets may be liable.
A debt incurred by a spouse during the marriage is presumed to be a community property debt. A debt incurred before the marriage is presumed to be separate property debt. If a debt is incurred during the marriage, but the creditor agreed to look solely to the separate property of the spouse for satisfaction of the debt, then the debt may be a separate property debt. Characterization of the debt as in the nature of community property does not determine the question of liability. The designation of a debt as community property has no effect on which spouse may actually be liable for the repayment of the debt. The fact that spouses are married, does not, by itself, create liability by one spouse for the debts of the other spouse. The mere fact of marriage does not create joint liability on all debts. If one spouse incurs a debt as the agent for the other spouse, or if the debt is for basic living necessities, then both spouses may be help jointly liable, together with the jointly help community assets.
To determine which spouse’s properties may be liable, the marital property needs to be classified as to which spouse has the right to manage it – each spouse may have separate and community sole management property and there may be joint management property of both spouses. A spouse’s separate property is not generally subject to the other spouse’s debt liability. Further, each spouse has sole management and control over his or her community property that each would have owned except for being married, such as personal earnings. This sole management community property may only be used to satisfy the debts of the spouse that manages the property or the joint debts. Jointly managed property, such as a jointly titled asset, may be used to satisfy either spouses’ community or separate liabilities.
When looking at borrowed funds, the examination goes further into the intent of the spouses in incurring the debt. If the money is borrowed to benefit a spouse’s separate property, and the intent is to repay the funds using separate property, then the borrowed funds will likely be separate in nature.
Most credit cards are opened with an account agreement. From a contract law perspective, only the parties to the contract are bound to the terms of the agreement. Therefore, it is simple to determine who is contractually liable if one has a copy of the account agreement – which hardly ever happens in practice. If that is the case, the practitioner can utilize the credit report to determine if the spouse is contractually responsible, or just an authorized user. Arguably, if a spouse is designated as an authorized user then that may create agency as defined above. Alternately, if the purchases were for necessities, liability could be present regardless of whether one was an authorized user or not.
Nevertheless, an authorized user should probably not seek to assume this unsecured liability in the decree. If this is done, the authorized user will have a difficult time in restricting the future access of the other spouse to that account. While an in junction may assist in protecting the authorized user, it would still be advisable to not seek responsibility for the payment of this debt. Alternatively, the spouse who is the primary card holder should (as soon as legally possible) revoke the authorized user status of the ex-spouse to avoid problems.
In determining the division of the overall estate, and debt in particular, it is important to determine which spouse and/ or assets may be liable for the debt and divide the debt according to liability. Otherwise, if a debt is allocated in a divorce to a spouse who is not legally liable, then the spouse has little motivation to pay and there are few legal remedies available in the court system to force payment against a non-willing spouse. Further, the credit of the spouse incurring the debt can be damaged by relying on the nonliable spouse to make payment.
The division of debts between the spouses has no effect on the creditor’s ability to collect the debt. Even if one spouse is allocated the debt in the divorce, if the debt is one for which the other spouse is liable, the creditor can seek payment from the other spouse regardless of the wording of the divorce decree. The only recourse that a spouse has in such a situation is to sue the spouse that was supposed to pay and seek reimbursement.
One way to conclusively address debt and liability in a divorce is to allocate other assets to pay the community debts of each spouse, leaving fewer assets but no debts to divide. When possible, the system allows both spouses to leave the marriage with a "clean slate."
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