Taking on a Spouse’s Debt during Marriage

 Posted on June 13, 2014 in Family Law

Commingling Lives

When a couple decides to marry they are choosing to come together and combine all aspects of their lives. They consolidate their living space, blend their families, and join finances. Unfortunately, joining finances sometimes also means taking on the other spouse’s individual debts.

Am I responsible for my spouse's debt when I get married?

Marriage is a symbolic joining of two parties into one unit. Marriage is also a contract. When you first get married, there are many ways to avoid taking on your spouse’s debt. However, how you go about managing your finances throughout the marriage will determine if you will be responsible for the debt later on in the marriage or upon divorce.

Make sure to be clear in whose name the debts will be titled. If you do not want to be liable for the debt, make sure your name is absent from the title. Also, depending on the state in which you reside, different property laws may apply to ownership, division, and debt.

Community Property States

Nine states in the U.S. are considered community property states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. Under community property law, you are jointly responsible for debt incurred by either spouse during the marriage but are not responsible for any debt incurred by your spouse prior to marriage.

Any debt opened during the marriage in one spouse’s name will be considered a joint debt for which the other spouse is responsible. Community property states do, however, allow spouses to contract out of such restrictions by signing agreements stating that each spouse’s debts will be dealt with separately.

Common Law States

Forty-one U.S. states are considered common law property states. In a common law state, you are not responsible for your spouse’s debts prior to the marriage and you are also not responsible for your spouse’s debts incurred during the marriage. Under common law, only the person whose name is on the debt is responsible for repaying the debt. There are exceptions to the common law rule if the debt accrued from joint household expenses. These may include items such as food, clothing, and shelter.

Joint Accounts

If you open a joint account with your spouse, you will be held jointly liable for any debts that occur on the account. It does not matter whether you live in a community property or common law jurisdiction. It also does not matter whether you have ever accessed the account yourself. Any agreement you sign (even as a co-signer of debt) is considered your debt should the spouse default on it.

As a joint account holder, anytime you sign into your spouse’s pre-marriage account, you are assuming liability for that debt going forward. You may also take on a spouse’s pre-marriage debt if you consolidate accounts from before and after the marriage or if you refinance debt together under a joint account.

Credit Reports

A credit report is a document that lists out an individual’s credit history. It does not combine a married couple’s history into one report once they get married. Despite the fact that you and your spouse will maintain individual credit histories, your spouse’s bad credit can still affect your finances during the marriage.

If you apply for a credit card, car loan, or mortgage for a home, both you and your spouse’s credit history will be looked at and factored into the determination. If your spouse has bad credit, you may be denied a loan or offered unfavorable rates even if you have a good credit history.

Lopsided Debt

According to a study by the advocacy and research group, the Institute for College Access & Success, the average 2012 graduate finished with $29,400 in debt. However, they also concluded that almost 30 percent of 2012 students graduated without any debt at all. The overall conclusion is that it is a likely scenario that when a couple decides to marry after graduation, one spouse may have debt and the other may be debt free. This leads to the issue of one spouse assuming the pre-marriage debts of the other.

Resources in Illinois

It is important to understand all debt-related and other family law issues that arise during a marriage or divorce. If you have any family law questions, please do not hesitate to contact an experienced Illinois family law attorney at Mevorah & Giglio Law Offices.