Things can be complicated in a marriage, and this includes finances in some cases. When debt enters the picture, there are often many questions that come with it. In today’s world, it is likely that at least one spouse will come to a marriage with some form of debt, from credit cards to cars to student loans. The question of who is responsible for that debt becomes a very important one to answer.
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I will attempt to answer this question for different scenarios, but it is important to realize that I am not a law expert, nor a financial professional. Additionally, whether or not you are responsible for your spouse’s debt may depend on whether or not you are in a community property state, and may depend on other state laws. While you can get a general idea of whether or not you are responsible for your spouse’s debt from this article, it is best to get the opinion of a legal professional licensed in your state.
When I Marry My Spouse, Do I Marry His or Her Debt?
The good news is that, in most cases (community property states may be different), debt that your spouse incurred in his or her name prior to marriage is not likely to become your responsibility upon marriage, even if you combine bank accounts. In many cases (but not all) you remain separate in term of debt responsibility and credit score.
Some of the things you do, though, can make that debt your responsibility. If you decide to have your name added to a spouse’s credit card, it can connect you to the debt. Additionally, if you refinance your mortgage or a car loan in both your names, you can become responsible for debt that you may not have incurred. Also, consolidating credit cards or student loans into one loan with both your names will result in you assuming at least some of the responsibility for the debt.
What Happens to the Debt if We Divorce?
For the most part, debt incurred before the marriage stays with the person that incurred the debt — especially if that debt remained in your spouse’s name. Things get trickier if you have added your name to accounts or refinanced debt that wasn’t yours to begin with.
When you incur debt together, in your marriage, you are both usually responsible for it. You might both have to pay the debt, or there might be some arrangement. In states where community property is not practiced, it is often possible to avoid responsibility for debt that you did not benefit from. If your spouse borrowed to finance a hobby or take a vacation, you may not be responsible for it, even though it was incurred during the marriage.
One spouse may be made responsible for the debt incurred during the marriage, but the settlement during divorce might allow for that person to receive a greater share of property and assets to offset the obligation. In some cases, different debts are assigned to different partners to be responsible for. It depends on state law, and on the type of divorce settlement reached.
What Happens to Debt Upon Death?
It would be nice if someone’s debt just disappeared upon death, but this is not the way it works. If a spouse’s debt is in your name as well, you become responsible for the repayment of that debt. I co-signed on my husband’s private student loan; if he dies, that debt is my responsibility. However, for debts that your name is not on, your spouse’s estate is responsible. The obligation has to be repaid from the assets that your spouse had. This can reduce what comes to you. Many families get life insurance so that debts can be paid off if a spouse dies.
In the end, your circumstances, and the names associated with the debt, govern what happens with it. Find out what state laws apply to your situation, and do what you can to ensure that the debt is settled appropriately.
Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own blog at Miranda Marquit.