How You May Be on the Hook for Your Spouse’s Debt
Written by
Heather Altamirano
Edited by
T. Woods
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In some cases, knowing the state’s law and understanding your partner’s financial habits can be equally important for your financial health. Depending on where you live, married couples are liable for their spouse’s debt. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, meaning you’re on the hook for their financial woes if acquired during the marriage.
Community Property States
If you reside in one of the nine community property states, it’s important and empowering to understand the basics of separate and community property. This knowledge can help you navigate potential financial challenges and protect your assets.
“Community property is defined as essentially everything that spouses own together,” per Trust & Will. “In essence, it’s anything that’s acquired during a marriage. A community property state determines all property, earnings (and debts!) that accumulated during a marriage are equal amongst two people.” That includes student loans, medical bills, and gambling debt that was acquired during the marriage, according to the legal website Nolo.com.
It Matters When the Debt Incurred
In community property states, the couple is responsible for the debt, even if only one spouse signed the paperwork.
“Because the key is ‘during the marriage,’ it matters when the debt was incurred,” per Nolo.com. “For instance, if your spouse incurred a credit card debt while single, it won’t automatically become a joint debt if you get married. Why? Because a spouse is responsible for credit card debt incurred during the marriage, but not before.”
Inheritances and Property
If you owned property before marriage or received an inheritance, keep it separate if you’re concerned about the money becoming community property.
“Gifts and inheritances received by one spouse–and separate property owned before the marriage–remain separate and are the respective property of one spouse alone,” according to Nolo.com.
However, a court could consider a gift or inheritance community property if added to a joint bank account.
Creditors Can Come After Both Spouses
Creditors will pursue both spouses for unpaid debt. “Suppose a business owner’s name isn’t on the spouse’s boat title,” Nolo.com explained on their site. “In most community property states, that won’t stop a business creditor from suing in court to take the boat to pay off the business owner’s debts if the boat was purchased with community and not separate funds.”
How To Keep Assets Separate
In order to treat debts and income separately, married couples in community property states can sign pre- or postnuptial agreements. That said, “A contract between you and your spouse only won’t affect whether a creditor can pursue you for debt (they still can),” per Nolo.com. “It really only impacts property and debt division upon divorce.”
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