It’s no doubt that each partner comes into a marriage with some debt, i.e. student loads, credit card or a mortgage from a home he or she already owns. How you work together to tackle this debt and your finances throughout the marriage will make the road ahead a smooth or bumpy one.
A question I often hear from clients going through a divorce or after the death of a spouse is, “Am I Liable for My Spouse’s Debt?”
Whether you and your spouse are liable for each other’s credit card debts depends on a handful of factors. In most states, you are only responsible for the debt that you sign for. If you are not listed on the account, then the debt is not in your name.
In a divorce situation, you can be liable for credit card debt in two ways — by direct liability (joint credit card) to the credit card company or by the divorce agreement.
However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), you are considered a co-owner of the debt, regardless of whether or not your name is on the account. Therefore, your partner’s debt will affect your credit and you are legally responsible for it as if your name was on the account.
If you are not living in a community property state, you most likely live in a common law state. In a common law state, you are not liable for your spouse’s debt before marriage, and you can typically avoid responsibility for your spouse’s debt after marriage. Common law holds that only the person whose name is on the debt is liable for its repayment. An exception is if the debt was incurred for joint household expenses, such as food, clothing, shelter, medical care, education or childcare.
For example, if your partner has medical problems and has to go to the hospital or emergency room and can’t pay the medical bills for this visit – if you have the money to pay these bills, the creditor can come after you for payment.
Have questions about spousal debt liability? Give me a call, and let’s talk about your situation and what your options are.
Until next month,
THD Credit Consulting ・(800) 822-7120 ・firstname.lastname@example.org