Common law debt states have rules governing how debts are shared after marriage. When a couple unites in marriage, it means they are choosing to merge all aspects of life – including their finances. Even though you are partnering in the marriage, it doesn’t mean that debts incurred before the marriage will become a shared responsibility.
Community Property vs. Common Law States
Debt responsibility in marriage is based on state laws:
- Community Property States: Nine states in the USA have community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community property means that any debt taken on during the marriage is the responsibility of both parties. As a result, both spouses carry a shared obligation, even if they didn’t know about the debt or agree to the terms.
- Community Property Opt-In: If you live in the state of Alaska, then it means that you can agree to community property responsibilities, but most couples don’t choose this option.
- Common-Law Debt States: The remaining states in the USA are known as common law debt states. This structure means that spouses can take on individual debt during the marriage, without their spouse sharing the responsibility of repayment. Common law allows couples to choose separate bank accounts if desired, and they can also access credit cards and car loans without involving their spouse.
More Information about Common Law Debt States
The above description is a brief overview of how debt is managed in common law debt states. But there is a little more involved, depending on the type of debt and purpose of the debt. For example, some common law rules maintain joint debt responsibility when the debt benefits the family and couple equally, such as a shared rental or food and clothing.
If spouses prefer to maintain individual debt, then the loans and credit cards need to be in the name of one spouse only. The spouse whose name is not on the account has no legal obligation to repay the balance.
On the other hand, spouses can incur joint debt if they apply for a credit card or loan together. One common example is an application for a home mortgage where both spouse’s incomes and credit scores are considered in the loan application.
Dealing with a Spouse’s Debt
It’s inevitable that debt will be incurred together in marriage. Not only do you need to have a shared understanding of how the debt payments are handled, but also consider the potential impact of debt if a split occurs in the future. You may be obligated to meet the payments if your name was on a loan with your spouse. On the other hand, you don’t have any requirement to pay your ex’s individual loans if you are living in one of the common law debt states listed above.