a person manages debt after a divorce

Finances are often a point of contention in a divorce. Texas is a community property state, which means that assets obtained during a marriage belong to both parties. The same goes for debt, but things can get complicated when it comes time to split everything up. The debt relief lawyers at Leinart Law Firm advise clients to discover all their options for repairing and protecting their finances before, during and after divorce. Knowing who may be on the hook for certain debts after a divorce can help you better understand your own rights and responsibilities.  

Credit Card Debt in Texas

a person manages credit card debt in Texas

Typically, in Texas both spouses are liable for joint credit card debt accumulated during a marriage, regardless of whether both names are on an account. Any credit card debt that was incurred before you got married will most likely be your sole responsibility after divorce. Texas law is quite nuanced, and a judge may determine who owes what debts by reviewing the purpose of the debt, when it was incurred and who incurred it.

If you have overwhelming credit card debt, filing bankruptcy in Texas can help eliminate it or significantly reduce the amount you have to repay. Your best bet is to file a joint bankruptcy with your spouse before filing for divorce. All individual and shared credit card debt can be wiped out in Chapter 7 bankruptcy or restructured into a three- to five-year repayment plan if you decide to file Chapter 13 bankruptcy it will be either wiped out or greatly reduced, depending on your income. Which type you file will depend on several different factors, including your income, the total amount of debts owed and your ability to repay your debts.  

If you’re concerned about your spouse racking up credit card debt before your divorce, talk to a Dallas bankruptcy attorney about how you can minimize the amount for which you may be responsible.  

Responsibility for Auto Loans

a toy car sits on top of cash and car keys

When you’re a cosigner on almost any loan, you’re responsible for the debt if the other person doesn’t pay. When both spouses’ names are on auto loans, things can get tricky. If the loan goes into default, both parties are liable for the loan’s balance, late fees and collection costs, not to mention the negative impact it can have on each person’s individual credit score.

If you are able to make payments and you and your spouse agree on who’s keeping which vehicle, one way to avoid problems is to approach the lender and ask them if you can refinance it on your own.  If you’re already behind on payments you can file a Chapter 13 on your own to allow you to get caught up on the payments while also protecting it from repossession.  If you co-signed on your spouse’s vehicle you can file either a Chapter 7 or a Chapter 13 on your own which will allow you to surrender your interest in that vehicle and get rid of the liability should that spouse not make timely paymentsand you and your spouse are on good terms, filing a joint bankruptcy while you’re still married can be an effective solution that may help you keep your vehicle.

Mortgage Debt and Foreclosure

the word “mortgage” is displayed on a laptop computer

If your mortgage is in good standing and you are both on the loan, the easiest solution is to sell the house and split the proceeds. One spouse may also buy out the other’s share if they want to stay in the home. However, if your divorce is a done deal, these issues should have already been settled in your divorce settlement agreement. For example, if your spouse was granted the family home in a divorce, it’s critical to make sure a proper judgment is entered and the title and mortgage are transferred to them. That way, lenders can’t come after you if your spouse defaults on the mortgage or files bankruptcy after your divorce is final. There are also certain homestead exemptions that apply when filing for bankruptcy in Texas.

Sorting out these complex issues while ensuring your interests are protected is paramount to safeguarding your financial future. Regardless of whether your ex-spouse has filed bankruptcy or if you’re considering it yourself, talking to an experienced Texas bankruptcy lawyer can help you understand how debt issues may impact your credit score and financial stability.

What If My Ex Doesn’t Pay Debts Assigned to Them After Divorce?

a person holds an envelope filled with overdue bills

When debts and assets have already been divided in a divorce decree, many people think they are no longer responsible for those assigned to their ex-spouse. Unfortunately, this is not always the case. Even if your ex has been ordered by the court or has agreed to pay certain debts, you may still be responsible for them if your former spouse can’t or won’t pay. Your divorce order is a binding agreement between you and your ex-spouse, not your creditors. Who is named responsible for a debt is irrelevant to them, so if a debt that’s solely in your name or in both your names isn’t being paid, a creditor can pursue you for repayment.

Even if your ex files for bankruptcy after divorce, creditors can still come after you for certain debts. It can be tempting to ignore these issues to avoid dealing with your ex. However, if you fail to pay debts for which you are liable, your credit score will drop and most likely continue to plummet.

Depending on the circumstances, a creditor may file a judgment against you, garnish your wages or try to collect the debt through other methods. For example, you and your ex are cosigners on a car loan that your former spouse agreed to pay after divorce. You drive the car to and from work every day, but your former spouse hasn’t made a payment in months. One day you step out the door and notice that your car is gone. It hasn’t been stolen — the lienholder has decided to repossess the car for nonpayment.

How Can Filing Bankruptcy in Texas Help?

the exterior of a bankruptcy court building

When you file Chapter 7 or Chapter 13 bankruptcy in Texas, an automatic stay is put on your debts, which means creditors must stop pursuing you for payment. However, filing bankruptcy is serious business that affects your credit score and finances long term, so seeking the counsel of a seasoned debt relief lawyer before you make this decision is vital.  

Chapter 7 bankruptcy can completely wipe out unsecured debt such as credit cards and medical bills and help you start over with a clean financial slate. Chapter 13 lets you reorganize your secured debts (like home and car loans) and pay them back over a period of three to five years. It can also eliminate a portion of or all of your unsecured debts.

However, not all debts can be discharged in bankruptcy. Some examples of non-dischargeable debts in Texas include:

  • Student loans
  • Child support and alimony
  • Some tax debts
  • Fines, restitution and court fees for criminal acts
  • Judgments for personal injury damages from a DWI accident
  • Retirement account loans
  • Debts related to fraud

Your Dallas Fort Worth bankruptcy attorney can take a look at your divorce decree, evaluate the current state of your finances and develop a strategy to resolve the issues you’re facing. This doesn’t necessarily mean that bankruptcy is your only option. Your lawyer may recommend negotiating with creditors, debt consolidation or other debt relief solutions tailored to your specific needs and goals.

Ways to Prevent Your Credit Score From Dropping After Divorce

a person cuts a credit card with scissors, which is a way you can prevent your credit score from dropping after divorce

Keeping a close eye on your credit after a divorce can help you avoid financial problems before they get out of hand. Make sure to:

  • Check your credit report frequently
  • Dispute any errors with credit reporting agencies
  • Read and keep monthly statements for any loans or credit cards
  • Keep your mailing address up to date with all creditors
  • Use credit cards wisely

You may also want to send certified letters to your creditors to inform them of your divorce and ask them to release you from liability from any debts your ex-spouse is responsible for per your divorce decree. If your former spouse‘s failure to pay debts is having a significant impact on your finances and credit score, you may be able to file a civil action against them. Your Fort Worth debt attorney can provide the counsel you need to determine whether this is a worthwhile option. For example, if your ex simply doesn’t have the money, getting a judgment against them may be a losing battle.

Contact a Texas Bankruptcy Attorney to Learn More

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For more than 15 years, the bankruptcy lawyers at Leinart Law Firm have helped Texans find common sense debt relief solutions to meet their needs and give them a fresh financial start. Whether you’re considering ending your marriage or dealing with debt after a divorce, our knowledgeable, compassionate team is here for you. Fill out the contact form on our website, use our convenient chat feature or email us today to schedule a free consultation. We’re proud to serve clients in Fort Worth, Plano, Dallas and throughout north Texas.