Your wedding day can feel like something out of a movie or a fairytale, filled with unreal moments of joy and memories so incredible that you can barely believe they happened to you.
Unfortunately, reality sets in for most, eventually. Your wedding ends, as does your honeymoon, and suddenly you’re back in the real world, consigned to dealing with reality. As a newlywed, your newly joint finances are probably the last thing you want to think about. If you’re divorced, you’re probably trying to unentangle your finances as quickly as possible.
Few realities are more of a drag for people than the realities of credit card debt. Maybe you ran up your credit card getting yourself out of a financial jam, or maybe you hit your credit limit financing luxury purchases with money you thought you had. The reasons you got into credit card debt in the first place are, at the end of the day, irrelevant. What matters now is dealing with your debt intelligently and responsibly.
Marriage adds an interesting but troubling wrinkle to the question of debt. As you probably already know, when you get married, the laws regarding property can change dramatically. In the eyes of the law, you and your spouse are a single unit. When you get married, what happens to your credit card debt?
Divorce can make it even more complicated. As you work to overcome the emotional roadblocks at the end of a marriage, you must also work to separate your finances and emerge with some sort of fair understanding.
We’ll lead with the good news here: more than likely, you aren’t personally and directly responsible for the credit card debt that your spouse brought into the marriage. Still, the exact laws governing marriage and debt are complicated. To make matters even more confusing, these laws can also vary depending on which state you live in.
Therefore, if you and your spouse, or ex spouse are dealing with credit card debt, keep on reading to get a better idea of what, exactly, you are dealing with.
If engaged, and you know your other half is running up credit card debt
The Internet is chock full of individuals that ask questions that start out like this:
“I love my fiancé so much, and I’m so excited to get married to him. That said; I’m worried about his spending habits. He seems to use his credit card when we go out, even when I know he has money in the bank. Recently, he confided in me that he’s sitting on $30,000 in unpaid credit card debt. He says he has the situation under control, but should I be worried?”
The short answer, of course, is yes. If the person that you’re planning to marry and spend the rest of your life with can’t exercise basic financial discipline, instead choosing to run up unnecessary debt; that’s a red flag. It doesn’t mean that your fiancé is a bad person. It just means that he needs to get a grip when it comes to spending habits.
You should do everything you can to try to talk some sense to him. If he needlessly whips out the credit card to buy dinner or groceries, ask why. Ask how much he is spending on minimum credit card payments each month, and then wonder aloud how the two of you might spend that money more wisely, if debt weren’t an issue. Offer to help come up with a financial plan that will help your spouse get out of debt. Help to solve the problem now so that it doesn’t endanger your shared finances in the future and put undue strain on your marriage.
All of that said; if your soon-to-be spouse acquires the debts before you get married, you aren’t responsible for them once you actually tie the knot. That isn’t to say that they won’t affect you; if your husband has his wages garnished, you’re both likely going to feel the pain, but you won’t legally be on the hook. For both of your financial health, it may be wise to start focusing on saving before you even get married.
If you’re married and your spouse runs up credit card debt
Once you’re married, things change, and not just in the happy-go-lucky newlywed way. Married couples are different in the eyes of the law, and that extends to the way the law handles outstanding credit card debt.
Generally, if you and your spouse are joint account holders on the credit card, then you will be equally liable for the spending on the credit card. Co-signing on your spouse’s credit card will also make you liable for payments on that card. That fact remains true even if it was your spouse, not you, who did all of the irresponsible spending. If your husband runs up your jointly held credit card playing fantasy football, or your wife runs off on a spontaneous solo vacation with the credit card you co-signed on, you are both still liable for the debt.
In the same vein, a jointly owned property is also fair game if the credit card debt goes into collections. Jointly owned property can be seized to pay off the debts even if one spouse has nothing to do with running up the debts.
In fact, even the proceeds from property might be fair game; let’s say assets that your husband ran up on his own individual credit card. Then, a collection agency obtains a judgment against him. In a misguided attempt to protect your assets, the two of you decide to sell off your husband’s collection of guitars, netting $5,000 for the entire set. You then deposit it in your bank account, since you’re not technically on the hook for the debt. Your husband’s creditors may still be able to go into your bank account and seize that $5,000, even if you’re not legally responsible for the debt itself.
In general, unless the credit card debt stems from a jointly owned account, or the creditors are going after jointly owned property, you shouldn’t be responsible for your spouse’s credit card debt.
This law changes, though, depending on whether you live in a “common law” state or a “community property” state.
The Common Law States
Most states are common law states (41 out of 50, in fact). In common law states, the law functions pretty much as we’ve outlined above. If you are a joint account holder, or you cosigned on your spouse’s credit card, then you’re on the hook for the debt that your spouse has run up. Otherwise, you aren’t legally liable for the credit card debt.
Community Property States
Nine of 50 states are community property states. These are:
- New Mexico
In addition, Alaskans have the option to opt-in to a community property marriage, but this is not the default.
Don’t live in one of these states? Breathe a sigh of relief. If you do, though, take a breath, as there’s a lot to unravel here.
The laws vary among these nine states, so if you really want to dive into the nuances of community property law, you’ll probably need to dedicate the whole afternoon to the endeavor. The main point, though, is that any property or debt accumulated during your marriage becomes the responsibility of both spouses automatically, even if one spouse accumulated that debt in secret for his or her own selfish reasons.
There are exceptions to this rule. If you can prove that your spouse’s spending had absolutely no benefit to you or your marital community, you might be off the hook. Some states even dub certain types of debt, such as debt accrued from drugs or gambling, to be “marital waste” that doesn’t count against the more responsible spouse.
Despite these exceptions, if you live in a community property state, you’re going to wind up responsible for your spouse’s debts. That fact holds true even if those debts were run up in your spouse’s name only and without your knowledge or consent.
If you get divorced and your spouse has lots of credit card debt
As we’ve already mentioned, serious debt is sure to affect your marriage in some way. Unfortunately, if you decide to get divorced, your spouse’s debt problems don’t suddenly stop affecting you. If anything, they can adversely affect the divorce process, making it even messier.
If you live in a common law state, then credit debt incurred jointly will need to be a consideration during the divorce process. Much like joint property, joint debt needs sorting when you divorce.
If you live in a community property state, then both spouses are most likely going to be responsible for the debt, even if not jointly held. What can make this process even murkier is that the rules governing this debt change once you and your spouse separate. You might not be responsible for your spouse’s debt after you’ve separated, but it might be difficult to pinpoint the exact “moment of separation.” In some states, you must legally declare this separation, while in others, it starts the moment the two of you stop living together.
Getting divorced is usually messy and painful, and the best advice we can give for making it easier would be to try to take debt out of it. If you can eliminate the credit card debt that you and your spouse share before the divorce is final, you won’t have to deal with it at all post-divorce. It will take some sacrifice and some dedication to wipe these debts out, but it might make your life a lot easier in the end.
If your spouse dies with outstanding credit card debt
Even more painful than divorce is the thought of a spouse’s death. That said; most people pass away with some kind of debt to their names. If your spouse dies with outstanding credit card debt, do you inherit it?
Technically, as above, the liability regarding the debt depends on whether you live in a community property state. In a common law state, you won’t be directly liable unless you’re also on the account. In a community property state, you will likely be liable for the debt that your spouse ran up during your marriage.
The matter of your spouse’s estate also factors in here. When someone dies, everything he or she owned becomes a part of the estate, including debts and assets. His or her debts are then paid out of the estate, usually before the rest of the estate is distributed.
How might this play out in real life? Imagine that you live in a common law state and that your husband, whom you love very much, has a gambling problem. In secret, he opens up a bunch of credit cards and runs them up gambling on the Internet while you’re not home. Then, suddenly, he passes away from a heart attack, leaving you to sort out his estate and figure out how to move on.
This tragic situation is even more tragic after what happens next. Your husband’s life insurance policy pays out, his individual assets sold off, and his bank accounts tallied up. Before all that can go to you, your husband’s creditors get a crack at it, using that money to pay off the debts that he owed when he passed away.
Despite the fact that you were not personally liable for your husband’s debts, you end up paying for them. Money from his estate that should have gone to you to help you to defray expenses and get on with your life ends up in the hands of his creditors. It’s an unfortunate situation, but it can happen.
In all, the basic question to ask yourself is this: do you live in a community property state? If you don’t, then you’re probably not liable for any debts that aren’t explicitly in your name. If you do, then you’re probably liable for any debts accumulated during the period of your marriage, regardless of your current marriage state. You should definitely consult with a professional about your particular situation to discuss your options, but that about sums it up.
Your best bet, whether you’re liable for your spouse’s debts or not, is to get out of debt as fast as possible. This is especially important in the event your relationships ends in a divorce, as dividing debt at the end of a marriage can be tricky. By getting out of debt, you won’t have to worry about working these kinds of things out at an inconvenient time.