Texas Community Property and a Spouse’s Creditors

A judgment against one spouse in Texas creates no debt for the other spouse. A creditor of one spouse collects from property, never from the other spouse personally. Which property it can take turns on two facts: who manages the property, and whether the judgment is for a tort.

For a debt that is not a tort, the creditor reaches the debtor spouse’s separate property, any community property that spouse manages alone, and everything the couple manages jointly. The other spouse’s separate property and sole-management property, starting with that spouse’s own earnings, stay out of reach. A tort judgment for a wrong during the marriage, a malpractice judgment included, reaches all community property.

Is a Texas Spouse Liable for the Other Spouse’s Debts?

No, a Texas spouse does not become liable for the other spouse’s debts by marrying. In Tedder v. Gardner Aldrich, decided in 2013, the Supreme Court of Texas adopted a commentator’s sentence on the point: “Marriage itself does not create joint and several liability.” 421 S.W.3d 651, 655 (Tex. 2013). Under the Family Code, personal liability for a spouse’s acts arises in two situations only. The spouse acted as the other’s agent, or the other failed to support that spouse and the debt was for necessaries. Marriage by itself creates no agency between spouses.

A spouse who co-signs a loan or a lease is liable on it like any other signer. None of the rules below shelters anything from a debt both spouses owe. The rules apply to a debt or a judgment in one spouse’s name alone.

The phrase “community debt” misleads. Texas courts once presumed that a debt incurred during marriage was a community debt, and the Supreme Court in Tedder described that presumption as misleading and as clarified by the statute. The Court quoted with approval the description of a community debt as “nothing more than that some community property is liable for its satisfaction.” The debt itself belongs to the spouse who incurred it.

One subsection of the liability statute is easy to misread. It says community property under a spouse’s sole or joint management is subject to that spouse’s liabilities. In Tedder, a law firm sued a husband for the fees his wife ran up in their divorce. The Court read the subsection in a footnote. The wife’s fees, the Court wrote, “might have been paid from community property,” but the provision “does not impose liability” on the husband. The Court also held that legal fees a spouse runs up in a divorce are not necessaries.

What Property Can a Creditor of One Spouse Reach in Texas?

A creditor holding a judgment against one Texas spouse can reach three kinds of property: what the debtor spouse owns separately, what that spouse manages alone, and what the couple manages jointly. A Texas bankruptcy judge stated the rule that way in In re Hall, 559 B.R. 463, 468 (Bankr. S.D. Tex. 2016). He added that the creditor reaches all three “without regard to whether the debt was incurred for community or separate activities.”

The same decision also says what the creditor cannot reach. The other spouse’s separate property, and the community property the other spouse manages alone, are not available to the debtor spouse’s creditors, while jointly managed community property is. That shelter covers debts from before the marriage and any debt incurred during the marriage that is not a tort.

A spouse’s separate property is what that spouse owned before marrying, received during the marriage by gift or inheritance, or recovered for a personal injury. The part of an injury recovery that replaces earning capacity lost during the marriage is not separate. Community property is everything else either spouse acquires while married. Property in either spouse’s possession during the marriage is presumed community property, and proving that an asset is separate takes clear and convincing evidence.

Each spouse manages alone “the community property that the spouse would have owned if single.” Tex. Fam. Code § 3.102(a). The statute names personal earnings, revenue from separate property, personal-injury recoveries, and the growth and income of all three. Everything else is jointly managed unless the spouses agree otherwise. Sole-management property of one spouse that is mixed with sole-management property of the other becomes jointly managed too, unless a written power of attorney or other agreement keeps it apart.

The liability rules sort out this way for a debt only one spouse owes:

Property	A non-tort debt, or any debt from before the marriage	A tort judgment for a wrong done while married
The debtor spouse’s separate property	Reachable	Reachable
The debtor spouse’s sole-management community property	Reachable	Reachable
Jointly managed community property	Reachable	Reachable
The other spouse’s sole-management community property	Not reachable	Reachable
The other spouse’s separate property	Not reachable	Not reachable

A Texas court of appeals applied that map in Montemayor v. Ortiz in 2006. A creditor holding a 1990 judgment against the husband on promissory notes asked the court to declare a business the wife ran open to execution. The business was community property under her sole management, and the judgment was a contract debt. The court of appeals upheld the ruling that it was never subject to levy and execution. 208 S.W.3d 627, 640–43 (Tex. App.-Corpus Christi-Edinburg 2006, pet. denied).

It all turned on what kind of debt it was. Had the judgment been for a tort committed during the marriage, the same business would have answered for it. Texas has decided marital-property liability under the same statute since 1997. Tedder, Hall, and Montemayor are the three Texas asset protection case law decisions that apply it to a creditor’s reach.

What a Tort Judgment Against One Spouse Reaches

A tort judgment against one Texas spouse reaches all of the couple’s community property, even the part the other spouse alone manages, if the wrong happened during the marriage. The Family Code states the rule in one sentence: “All community property is subject to tortious liability of either spouse incurred during marriage.” Tex. Fam. Code § 3.202(d).

A malpractice judgment and a negligence judgment after a car accident are tort judgments; a judgment on a loan, a lease, or a credit card is not. A physician’s malpractice creditor therefore reaches the brokerage account the physician’s spouse funded from that spouse’s own salary. The creditor reaches the salary too, once it is deposited. Texas exempts current wages only in the employer’s hands, and a deposited paycheck is an ordinary bank balance.

Two things stay out of the tort creditor’s reach. The debtor spouse’s creditor cannot touch the other spouse’s separate property unless both spouses are liable under some other rule of law, and that rule has no tort exception. And the other spouse still owes nothing personally. The judgment is collected from property; the other spouse is never the judgment debtor.

A Florida creditor holding a judgment against one spouse but not the other, in tort or in contract, gets nothing from the couple’s entireties property.

Can a Texas Couple Keep Property Out of a Spouse’s Creditor’s Reach?

Yes, Texas law gives a married couple two ways to keep property away from one spouse’s creditors, and each has a limit written into the Family Code.

The first is to keep sole-management property unmixed. A spouse’s earnings fall under that spouse’s sole management, and an account holding only those earnings stays under it. The other spouse’s non-tort creditors, and any creditor from before the marriage, get nothing from that account. Once both spouses’ earnings are combined in one account, the mixed money becomes jointly managed, and either spouse’s creditors can take it. The spouses can agree in writing to keep mixed property under one spouse’s management.

The second is a partition or exchange agreement. Spouses may partition their community property by agreement at any time, all of it or only part. The agreement can cover property they have not yet acquired. What a spouse takes under the agreement is that spouse’s separate property from then on, and the agreement can make the future income from that property separate as well.

Both spouses must sign it, in writing, and it needs no consideration. Between the spouses it is enforceable unless the resisting spouse proves it was signed involuntarily, or that it was unconscionable when signed and that the other spouse’s finances were neither disclosed nor otherwise known.

Its limit is the creditor who was already there. A partition or exchange agreement is void as to a preexisting creditor whose rights it was intended to defraud. A partition signed to keep assets from a creditor is also a transfer, and Texas’s fraudulent-transfer act gives that creditor four years to set it aside. Against a creditor without actual notice, it counts as notice only once it is acknowledged and recorded where the real property sits. And the spouse who gives property up under a partition gives it up for good.

The reverse agreement, converting separate property into community property, exposes the property. The Family Code prescribes a bold-type disclosure for that agreement, warning the converting spouse that the property may become subject to the other spouse’s liabilities. A conversion does not affect the rights of a creditor who already held a claim against the converting spouse.

Can the IRS Reach the Other Spouse’s Earnings in Texas?

Yes, the IRS can reach half of the other spouse’s earnings, because a Texas rule that shelters property from creditors does not bind the United States. In In re Whitus, a Texas bankruptcy court described the Fifth Circuit’s 1989 decision in Medaris v. United States.

The IRS had levied on all of a taxpayer’s income and on half of his wife’s, though she owed no tax. Her earnings were community property she alone managed, and the husband owned half of them; that half is what the levy reached. The court of appeals upheld the levy, and it made no difference that Texas does not call its rule an exemption.

In Whitus itself, the IRS had assessed payroll-tax penalties against the husband alone and filed a claim in the wife’s Chapter 13 case, on the theory that her earnings were community property it could reach. The court agreed that outside bankruptcy the IRS could take half of her earnings despite the Family Code, so the IRS held a claim in her case. 240 B.R. 705, 708–09 (Bankr. W.D. Tex. 1999).

The court then held that her Chapter 13 plan could pay that claim nothing. A Chapter 7 liquidation would have paid it nothing, because her earnings after the filing would not have been part of the bankruptcy estate and the homestead could not have been sold.

For the same reason, the Texas homestead is within a federal tax lien’s reach, whatever the state exemption says.

Does Texas Have Tenancy by the Entirety?

No, there is no Texas statute that creates a tenancy by the entirety. What a married Texan owns is either community property or separate property.

In the states that recognize it, tenancy by the entirety lets a married couple hold property as a single owner. Roughly half of those states, Florida among them, give a creditor of one spouse alone nothing from it. Texas gives a couple nothing comparable, and its tort rule runs the other way.

What a Texas couple already owns stays community property after they move to Florida. A creditor of one spouse can still pursue that spouse’s half until the couple retitles the property as tenants by the entirety.

What Texas Marital Property Law Leaves Exposed

Texas marital property law shelters what the other spouse owns separately or manages alone from a creditor whose claim is not a tort, and from a creditor whose debt predates the marriage. That shelter fails in three places. A tort judgment reaches all community property when the wrong happened during the marriage. A federal tax debt reaches half of the other spouse’s earnings. And everything the couple manages jointly answers for either spouse’s debts.

The cure the statute offers is the partition agreement, cleanest before any creditor exists, and it moves the property out of the transferring spouse’s hands for good. No marital-property planning changes the list of assets Texas leaves exposed to the debtor spouse’s own creditors, the cash and brokerage accounts above all. Asset protection in Texas for those assets starts with the exemptions the state does give. An offshore trust is the answer for the liquid assets those exemptions do not reach.