As common sense & statistics tell us, the leading cause of marital discord is money… Therefore, it’s not surprising :o that many times divorce inventories have more red numbers than black ones.

Media sources often portray Hollywood stars of ‘power couples’ divorcing. Included with the typical hype may be which party will get the mansion, vacation home, or car collection, but rarely is there any coverage about how the parties will divide debt.

The hard truth is that debt, just like assets, are included in the community estate. No matter what your own moral compass may register ® regarding your & your spouse’s debt, Texas case law establishes rules that might surprise :o you… First, debt incurred during the marriage is presumed to be community debt. See Cockerham v. Cockerham, 527 S.W.2d 162, 171 (Tex. 1975). There must be a sufficient amount of evidence to rebut this presumption.

Despite well established case law, Texas divorce decrees contain sections entitled ‘Debt to Husband’ & ‘Debt to Wife’, which seemingly assign responsibility for each debt. These sections of the decree will identify each creditor, the account number, & account balance. At the close of the divorce proceedings, the divorced couple has a lengthy document called a final decree of divorce. The husband, wife, their attorneys, & the judge sign the final decree. Often times the parties order a certified copy of their divorce decree, throw it in a drawer or the safe deposit box, & rarely look at it again unless there’re children & custody issues involved.

It may be months or years later when the phone rings & one of the parties is greeted by the monotone utterances of a bill collector reading a script off the computer screen. The dialogue may go something like this:

Bob the Bill Collector: ‘This is Bob with XYZ Visa. I am calling because your account is 60 days past due, & I need to know when you plan to remit the past due amount & begin making payments.’

You: ‘What are you talking about? That’s my ex’s account. Our divorce decree says so. I have not actually been married to him/her in over (whatever time frame)! Call that deadbeat for the money.’

Bob: ‘Well, Mr. or Ms. So & So, that does not mean you do not owe the debt if your ex defaults.’

You: ‘I have a certified court order signed by me, my ex, our attorneys, & the judge saying that I do not owe you anything for that account. That account is the ex’s problem. When you find him/her, let me know because he/she owes me money, too!’

Bob: ‘Your divorce decree might say you are not responsible, but the law says you are. Why do not you give me a check by phone & we can get you on a payment plan.’

You: ‘Are you dense?! Did you hear anything I just said?! I am not responsible & I am not paying you one red cent on any of that debt. Call the ex but stop hounding me!’

Bob: ‘Mr. or Ms. So & So, I myself did hear you, & you are wrong. No matter what your divorce decree says, you owe XYZ Visa. If you do not begin making payments, XYZ Visa will report this delinquent account to the credit reporting agencies, & take action up to & including litigation.’

I’ll let you fill in the closing dialogue for yourself. You are angry & hang up the phone. You may think that Bob, located at some call center hundreds of miles away, has no idea :idea: what he’s talking about.

As unsettling as it may be, Bob is right. Unless the XYZ Visa was a party to your divorce suit & agreed to the terms of the final decree, you owe the money… It’s highly unusual for a husband & wife or their attorneys to implead creditors into divorce actions due to complex legal issues such as jurisdiction & venue on both the state & federal level.

To understand how you could possibly be responsible for debt assigned to your ex, you must rewind to the point in time when the credit account was opened. You’ll need to look at the original account agreement. Almost no one keeps those documents, so order a copy of your credit report from one of the big three credit reporting agencies (EquiFax, Experian, or TransUnion). If the account shows up on your report, then you were more than likely a party to the credit agreement. Despite how the divorce decree allocates the debts (both secured & unsecured), the Court has no authority to modify the contractual obligations between the spouses & the creditor.

To say it another way, the court can not take away the creditor’s right to proceed against either spouse(s) for payment of a community debt that was incurred prior to the decree. See Blake v. Amoco Fed. Credit Union, 900 S.W.2d 108 (Tex. App. ? Houston [14th Dist.] 1995, no writ).

Let’s presume the account was originally opened in both your names & the creditor was looking to both you & your spouse’s income & assets to repay the obligation. This means that you’re both responsible for the debt. But what about the divorce decree that spells out which assets & liabilities you & your ex were assigned? Is it a worthless piece of paper? No.

You will not actually be easily able to file a motion to enforce the divorce decree to get the defaulting spouse to pay the debt. An enforcement action will only assist if there was specific property, such as a vehicle, brokerage account, or personal property, the other spouse failed to turn over. But what about the debt? All isn’t lost. You could file an action for breach of contract against the defaulting spouse. The divorce decree is a binding contract that both parties voluntarily signed before the court.

If your ex has defaulted on one or multiple obligations, a suit for breach of contract may be cold comfort. As the old saying goes, you can not squeeze blood from a turnip. Nevertheless, if you pursue this option, your damages may include any money you agreed to pay the creditor to keep the account out of collections, interest, & other miscellaneous expenses, such as attorney’s fees if any are incurred.

Depending on the size of the debt that the defaulting party hasn’t paid, you could seek relief in small claims court. Texas small claims courts have jurisdiction from $0.01 up to $5,000.00. These courts are designed for individual persons who want to represent themselves & avoid hiring an attorney. This is where people go straight to argue the ‘do right’ law. However – if the amount in controversy is greater than $5,000.00, then you must file suit in a county court, county court at law, or a district court with jurisdiction over the matter. At this point, you may consider hiring an attorney to prosecute the claim if there’s a reasonable possibility you could collect from the defaulting spouse. If possible, never let things get to this point by utilizing some of the suggestions outlined below.

Before you go straight to court or sign the final decree of divorce, you should research each & every account that the decree references no matter if that account falls under the ‘Husband’ or ‘Wife’ section. You both need to be fully aware how the accounts were established, & who & what the creditor deems liable. It may be in your best interests to refinance jointly held debt & establish the debt in each individual’s name if that is possible. If you or your spouse’s credit score isn’t strong enough to take this route, then you may consider liquidating assets to repay the debt before the divorce is final & close the account. It will be cold comfort to pay off a debt only to find out that your ex ran up a bunch of charges. A method may be to sell a car, a house, real property, or take a 401-K loan prior to finalizing the divorce to pay off debt. Because a mortgage & car loan can have long terms of payments, it may behoove you to sell those assets & let the other party acquire them on her or his own credit. By paying off those assets, those will no longer appear as debts on your credit report or create potential future problems if the other party fails to make payments to the creditor.

After your divorce is final, you may consider taking these actions:

1. Closing all joint accounts with a low balance or zero balance.
2. Request a credit report from one of the big three credit reporting agencies 90 days after the divorce is final. Look for any errors or discrepancies & aggressively challenge them in writing.
3. Ask each creditor to send you a duplicate notice for the joint accounts ? even if the ex was assigned this account. Monitor to ensure that payments are being made on a regular, timely basis.
4. Make an offer for accord & satisfaction ? basically, offer the creditor an amount of money in exchange for a release of your liability on the account assigned to your ex.
5. Communicate with the big three credit reporting agencies to notify them of the divorce & any name changes.
6. Create a debt reduction plan. There’re many excellent resources available, such as Consumer Credit Counseling Services, Dave Ramsey, or a church based debt reduction plan.

Bottom line ? your credit score is an asset just like your home or car. In actual fact, if you do not have a good credit score, your ability to obtain consumer or business financing may be very limited.

Houston Divorce Lawyer – More articles & resources can be easily found here.

Shannon Cavers is a Houston, Texas based lawyer practicing in divorce, family law & probate. More information & articles can be easily found at: Houston Divorce Lawyer