What If My Business Has Debts During a Texas Divorce?

 Posted on August 06, 2025 in High Asset Divorce

Dividing property in a Texas divorce is often complicated, especially if you have more complex assets like a business. It can be even more challenging when the business has outstanding debts. Loans, lines of credit, and other liabilities are not ignored during divorce. Instead, those debts must be accounted for and divided fairly under Texas law. If you are facing divorce and have a business with debts, you should speak with an experienced Austin, TX high-asset divorce attorney to protect your financial interests.

Does Texas Law Divide Debt During Divorce?

In Texas, both property and debt acquired during the marriage are considered community property. That means they are subject to division in the event of a divorce. According to Texas Family Code § 7.001, a court must divide the community estate "in a manner that the court deems just and right." This includes any debts tied to a family business, even if it is only in one spouse’s name.

Judges consider many factors when dividing community debt. These may include each spouse’s financial situation, who took on the debt, and how the funds were used. The goal is to divide both assets and liabilities fairly, which does not always mean equally.

Is Business Debt Considered Separate or Community Property?

Whether debt is characterized as separate or community property depends on how it was acquired. If the business and its debt existed before the marriage, they may be treated as separate property and not divided in the divorce. However, if the business was started during the marriage or if marital funds were used to support it, the business and its debt are likely considered community property.

Under Texas Family Code § 3.002, community property includes all property acquired by either spouse during the marriage, unless it qualifies as separate property. The same rule applies to debts. If both spouses benefited from the business, or if joint income was used to pay its debts, the court may divide that debt between them.

What Will Happen To the Business During the Divorce?

When a business is involved in a divorce, one of the most important steps is getting an accurate valuation. Before the court can divide the business or assign its debts, it needs to know what the business is worth. You will talk to your attorney about the process, which includes examining financial statements, tax returns, assets, liabilities, cash flow, and the business’s overall earning potential. In some cases, industry comparisons and market conditions are also factored in. A proper valuation is especially important in high-asset divorces or when the business represents a significant portion of the marital estate. Without it, one spouse could be left with an unfair share of the assets or debts.

Usually, one spouse keeps the business, while the other receives assets like cash or home equity. If neither can keep it, the business may be sold and profits divided. In rare cases, ex-spouses continue co-owning the business if they have a good working relationship and can share responsibilities productively.

Contact an Austin, TX Divorce Attorney Today

The Travis County, TX divorce lawyers at Powers Kerr & Rashidi, PLLC are Board Certified in Family Law and have a deep understanding of how business assets and liabilities can affect divorce outcomes. We serve families throughout Central Texas with personalized legal strategies tailored to each client’s unique situation. From start to finish, we are committed to protecting your financial future and guiding you through each step of the legal process. Contact us at 512-610-6199 today to schedule a consultation.