Am I Responsible for My Spouse’s Credit Card Debt?

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Whether grand affairs at exotic locations or intimate gatherings in front of a justice of the peace, weddings are magical, optimistic events. Tears of joy flow as the adoring couple vows to have and to hold each other for every eventuality — including for richer or poorer.

But a wedding is not a marriage, and honeymoons are not forever. What started as a fever hotter than the proverbial pepper sprout can be chilled by forces beyond the couple’s control. Vows fracture. Splitting up has ramifications beyond the emotional. One practical consideration: Will you be stuck with your spouse’s credit card debt and possibly end up much poorer than richer?

It can happen if you’re ill-prepared, uncommunicative, and/or financially reckless.

Here’s an idea: Talk about your financial expectations before you tie the knot. Unromantic, you say? “You’re about to get married,” says Chicago divorce attorney Russell Knight. “That’s the biggest romance-killer there is. So, get used to talking about money.”

If that ship has sailed and divorce is inevitable, two key factors carry inordinate weight: Where you live and how entwined your finances have become. If divorce is unavoidable, the less you and your spouse have combined your finances, the better. Or, at least, the cleaner the financial untangling.

Community Property States

When lovely weddings transform into ugly divorces, you probably don’t want to be living in a community property state, meaning all assets and liabilities are shared 50-50. The good news for financially responsible spouses is there are only nine of them: Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington, New Mexico, and Wisconsin. A 10th, Alaska, is an opt-in community property state; that is, couples choose whether to make their assets and debts part of their community of two.

In those states, everything acquired during the marriage usually is considered equally owned by the spouses. It is the “property” of their formerly amicable “community.”

There are nuances from state to state, but generally speaking, anything purchased during the marriage that can be regarded as improving the two-person community qualifies as community property. Accordingly, debt acquired as a result of those purchases – mortgages, auto loans, student loans, credit card debt – also is community property.

A key exception: Debts taken on by one partner that are demonstrably detrimental to the community — gambling debts, for instance — are not shared. Gambling winnings, on the other hand, are community property.

Also usually not sharable, notes Chicago attorney Knight: Debt acquired in a “non-marital endeavor,” such as spending on drugs or a lover. At least in these cases, divorce law steers clear of adding insult to injury.

Common Law States

In the 41 “common law” states, you are responsible only for debts in your name. That is why it’s important to think hard before entering into a joint account. Know what you’re getting into before signing your name to an account.

Beverly Hills, Calif.-based family law attorney Raymond Hekmat advises clients having arguments about money to try couples counseling, or to meet with a joint accountant/wealth advisor to review finances. Getting guidance from an expert can be a marriage-saver.

“Even though there may be concerns regarding debt,” Attorney Hekmat says, “the conversation can be about how to grow as a community, invest more, and build wealth for each other and
children.”

If money is tight, consider contacting a nonprofit debt counseling agency. Consultations are guaranteed to be engaging and wide-ranging, as well as free and without obligation.

Against mountains of experience, common law states optimistically expect people mature enough to marry also are responsible enough to be savvy about their mutual finances. If your ex charged $39,000 on a joint Visa card in both your names, you are equally liable for the debt. Also, if you cosign on your spouse’s credit card, you are on the hook for whatever bills are run up on that account.

We are not making this up.

“Debts that are martial spending – such as food, clothing, vacations – that is all marital debt that you accrue together,” says Morghan Richardson, matrimonial law partner with New York-Maryland-Washington D.C. firm Davidoff, Hutcher & Citron.  “If a spouse has a spending problem, maybe they are running up secret credit card debt on items for the house, and expensive clothing, that could be viewed as marital.”

Regardless of what state you live in, it’s not easy to totally protect yourself. For one thing, it might threaten your marital bliss. When couples sit down to figure out their finances, the last thing their love-struck ears want to hear is, “I’m madly in love with you, but I’m worried you might throw away $39,000 on ‘collectible’ Pez dispensers, so I want separate credit cards and bank accounts.

But it’s a conversation you simply must have.

“Discussing money can actually create intimacy and trust between partners,” Hekmat says. “It is an opportunity to work together toward a common goal, to learn what money means to each other, and to see how money will be dealt with during the marriage.”

Rule No. 1: Don’t spring it on your partner. Make an appointment. No, seriously. “Finances do not have a place in the bedroom or in a romantic space,” says Berkeley, Calif.-based credit empowerment coach Mia Love. “There is a time and place for all discussions. You won’t want to mix the two.”

Also, bring wine. “Everything is better over wine,” says personal finance website founder and president Leif Kristjansen. “If you have a painful topic to get through, balance it out with something you enjoy. My wife loves wine and when I wanted to talk to my wife about quitting my 9-5, we had a big bottle.”

Credit Card Debt

The rules are the same with credit card debt. If you let your spouse use one in your name, you alone are legally responsible for the debt (s)he incurs.

There’s just no way around the fact that for better and worse, money affects a marriage. “Financial infidelity” — hiding money or purchases from the other — “is one of the leading causes of marital discord,” Coach Love says.

Coach Love, too, encourages discussions moderated by someone with expertise in the field of family finances and debt. Again, if your budget is tight, nonprofit credit counseling agencies consult without charge or obligation.

Couples routinely cite finances as a leading cause of marital strife. In various studies, roughly 40% of respondents reported financial problems — “financial incompatibility” — stemming from disagreements over priorities and values surrounding money decisions.

“Having transparency into and candid conversations about finances can improve a couple’s relationship,” says Aviva Pinto, Managing Director of New York-based Wealthspire Advisors. “Money is the No. 1 issue couples fight about.”

Maintaining Separate Accounts

As noted throughout, honest discussions about each partner’s financial background, philosophy, expectations, and goals is central to a successful marriage — far more important than picking out the right wedding cake or the reception seating chart.

However, maintaining separate accounts — at least for personal spending, with a combined account for purely marital, or shared, expenses — would simplify things if your marriage hits the rocks. Such an arrangement might even be your lighthouse in otherwise stormy seas, says Attorney Richardson.

“Allow each spouse to have a separate account and be respectful of how much information about that account will be shared,” Richardson says. “Everyone needs a certain level of independence, and this should strengthen your relationship, not undermine it.”

If you really want to leave nothing to chance, work out a prenuptial agreement that keeps your income and debts separate. “Collaborating on a prenup actually gives the couple control over their own lives,” says Hekmat. “I think that is a pretty compelling argument for romance rather than the government controlling your marriage.”

If you live in a community property state, that won’t necessarily protect you against the debts your spouse brings to the marriage, but it will shield you against the debts he or she runs up after the agreement is signed.

Even if you sign an ironclad prenuptial agreement or set up individual accounts, it’s hard to totally disconnect your finances from those of your spouse’s. After all, married couples are ostensibly a team. And teammates are supposed to be able to rely on each other.

Mortgage and Auto Debt

If your spouse has a low credit score, you won’t get a desirable interest rate if you buy a house or car together. Mortgages are usually so large that — assuming you are relying on both incomes to qualify — applying individually would not work. But with car loans, the partner with the better credit score could apply individually.

Once approved, the other partner can pay his or her share. The only danger is if only your name appears on the documents, your spouse could drive away and you alone would be liable for repaying the loan.

Debt and Divorce

If you get divorced, it’s important to leave the marriage with no shared debt. Try to pay off joint cards together or divide the debt and transfer it to cards in each partner’s name. Learn more about how debt is divided in a divorce.

For openers, third-party creditors don’t care about any unofficial agreements — that is, promises you and your spouse or ex-spouse made to each other about credit card debt in divorce. Wherever you live, if both names are on the account, the credit card company will come after both.

“If you are getting a divorce and are dividing up debts,” Burbank, Calif.-based divorce attorney Stephen Cawelti says, “I would consider talking to your attorney about adding a ‘hold harmless’ clause in your divorce agreement.

“In any separation agreement or divorce document where one spouse is taking responsibility for a debt, it’s important to make sure that if third parties come after the spouse that is no longer responsible for the debt, the one responsible for the debt must pay the costs of the other spouse to fight the creditor.”

That will protect you if your ex-spouse files for bankruptcy or just does not pay what they owe. If you’re not protected, creditors can go after you for the full amount of the debt.

Dealing with Debt After the Death of Your Spouse

In the aftermath of the death of a spouse, be wary of creditors attempting to collect debts. Oftentimes, credit card debts are forgiven if held in the late spouse’s name alone. But the correct process must be followed.

  • Review the spouse’s credit accounts and jointly held debts; you may be grieving, but on-time payments must be made for accounts on which you are included.
  • Notify lenders about closing accounts that are held in the late spouse’s name alone.
  • For joint accounts, notify creditors that one party on the account is deceased.

Sorting what happens to credit card debt when you die falls to the executor of the late spouse’s estate (if there’s a will) or the court (if no will is in place). Having legal representation is an excellent idea to make sure creditors don’t overreach going after joint assets such as checking and savings accounts.

Typically, creditors cannot come after the proceeds of life insurance policies, retirement accounts (IRAs and 401[k]s), and brokerage accounts.

However, some situations leave the surviving spouse on the hook, including:

  • If the surviving spouse co-signed the debts.
  • If the credit card debt is in a joint account between spouses.
  • If required by state law.
  • If the couple lived in a community property state.

The death of a spouse is another of those times consultation with a nonprofit credit counseling agency may prove useful.

Financial Help for You and Your Spouse

“Financial stress is one of the top causes of marriages not working out,” says Burbank’s Cawelti. “Even when you both have similar goals and financial outlooks, juggling finances and coming to an agreement on financial decisions can be challenging.

However, he adds, “[D]isagreeing about certain aspects of your finances does not doom your marriage. If you both are committed to making it work and compromising, a financial planner can help you to work out an agreement and plan surrounding your finances.”

Again, nonprofit debt counseling agencies consult without fees or expectations. And if your marriage is otherwise sound — if the memories of what lured you together remain strong — getting your finances right is a favor you owe to your vows.

Maybe all your romance really needs is the tough love of a debt management program. A nonprofit organization will work as a debt consolidator and work to reduce the interest rates on your credit card balances.

Consumers make only one monthly payment that is lower than the combined payments that triggered so much marital strife. Credit counselors also work with you to set up a budget and financial goals to keep you out of debt.

Some nonprofit agencies offer a program called “Nonprofit Debt Settlement” in which the creditors agree in advance to accept 50%-60% of the amount owed to settle the debt.

Such advice could also come in handy much earlier, when starry-eyed couples are just starting out and not even thinking about ramifications of credit card debt.

The best wedding gift you could give your spouse, and yourself, is financial protection. You don’t want to look back on that magical day when you walked the aisle and realize you were really walking the plank.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.

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