Your One Stop Resource for Saving Money.
Is My Spouse Liable for My Credit Card Debt? - The Bills.com Blog
Bills.com Blog > Debthelp Questions > Is My Spouse Liable for My Credit Card Debt?
Is My Spouse Liable for My Credit Card Debt?
Thursday, Sep 24, 2009
Question: A debt collector is suing me for $5,700 in credit card debt. The credit card was in my name and the suit is also in my name only. Is my spouse responsible for my debt? If I get judgment against me and later file for bankruptcy will I still be liable for the debt?
Answer: Generally speaking, if both spouses sign a debt agreement both are jointly liable to the creditor. However, if only one spouse signed the agreement, then depending on which state the agreement was signed or where the spouses now live, the non-signing spouse may have liability.Spousal liability in community property states
Let us tackle the difficult states first -- the community property states. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin.
If the spouses now live in a community property state, or lived in one at the time the consumer debt account (such as a credit card account) was opened, the non-signing spouse may have incurred liability without signing a credit contract as co-debtor. If the debt incurred during your marriage was used for the benefit of both members of the marriage, liability may accrue to the non-signing spouse in community property states.
Regarding a non-signing spouse's liability IF the parties are living in a community property state AND the debt was incurred during their marriage for the benefit of both spouses, AND a spouse is sued and a judgment is rendered for a specific amount owed, the judgment can be collected by wage garnishment against any defendant included in the judgment order singularly or simultaneously. The garnishment amount is normally 25% of net income (that is, after withholding) but this varies from state to state. The creditor does not have any duty to "even out" the judgment liability between the spouses. A creditor has the legal right to collect 100% from either spouse, whichever is more convenient for them.
As a practical matter, even in community
property states, many creditors do not go to the trouble of suing both spouses, as doing so tends to complicate the legal process involved in obtaining a judgment. However, this does not mean that a particularly aggressive creditor will not pursue all of its available rights to collect a debt.
One important disclaimer: Community property laws are unique to each state -- no two states share the same laws. The discussion above regarding spousal liability is meant to provide general information about community property as a theory. Your state's laws may vary from the general theory. Therefore, it is important to consult with an attorney in your state who can review the details of your situation and give you accurate and precise advice about your rights and liabilities under your state's laws.
Spousal liability in non-community property states
Generally speaking, if the spouses never resided in a community property state, and only one spouse signed the loan contract (such as a credit card agreement), then the signatory-spouse is liable for the debt. Conversely, the non-signatory spouse does not share in his or her spouse's liabilities in non-community property states.
Bankruptcy
Now let us turn to bankruptcy. Let us assume one spouse filed for protection under chapter 7 or 13 of the federal bankruptcy code. That filing may not have any effect, positive or negative, on the non-filing spouse. In a non-community property state, the filing of one spouse does not give the other spouse protection of the "automatic stay" (blocking creditors from collection) or the bankruptcy discharge.
Similarly,
One important disclaimer: Community property laws are unique to each state -- no two states share the same laws. The discussion above regarding spousal liability is meant to provide general information about community property as a theory. Your state's laws may vary from the general theory. Therefore, it is important to consult with an attorney in your state who can review the details of your situation and give you accurate and precise advice about your rights and liabilities under your state's laws.
Spousal liability in non-community property states
Generally speaking, if the spouses never resided in a community property state, and only one spouse signed the loan contract (such as a credit card agreement), then the signatory-spouse is liable for the debt. Conversely, the non-signatory spouse does not share in his or her spouse's liabilities in non-community property states.
Bankruptcy
Now let us turn to bankruptcy. Let us assume one spouse filed for protection under chapter 7 or 13 of the federal bankruptcy code. That filing may not have any effect, positive or negative, on the non-filing spouse. In a non-community property state, the filing of one spouse does not give the other spouse protection of the "automatic stay" (blocking creditors from collection) or the bankruptcy discharge.
Similarly,
one spouse filing bankruptcy will not have an effect on the other spouse's credit report, if there are no joint debts. If there are joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non-filing spouse.
If both spouses are jointly liable to a creditor, the bankruptcy of one does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100 percent through the Chapter 13 plan, the co-debtor is protected by the co-debtor stay.
There may be good news for spouses who file for bankruptcy in a community property state. When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge.
Consult with an attorney to discuss the possible ramifications for both spouses. Bankruptcy laws and courts are federal, but community property and family law vary from state to state. It is important to discuss your situation with an attorney familiar with your state's marital property laws.
Bankruptcy and judgments
Some judgments cannot be discharged in bankruptcy, including child support, repayment orders dealing with cases of fraud, student loans and some taxes. However, a credit card judgment can be discharged in bankruptcy.
Review the Bills.com bankruptcy help page to learn more about this procedure, what it can do for you, and more on which debts can't be discharged in a bankruptcy.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
If both spouses are jointly liable to a creditor, the bankruptcy of one does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100 percent through the Chapter 13 plan, the co-debtor is protected by the co-debtor stay.
There may be good news for spouses who file for bankruptcy in a community property state. When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge.
Consult with an attorney to discuss the possible ramifications for both spouses. Bankruptcy laws and courts are federal, but community property and family law vary from state to state. It is important to discuss your situation with an attorney familiar with your state's marital property laws.
Bankruptcy and judgments
Some judgments cannot be discharged in bankruptcy, including child support, repayment orders dealing with cases of fraud, student loans and some taxes. However, a credit card judgment can be discharged in bankruptcy.
Review the Bills.com bankruptcy help page to learn more about this procedure, what it can do for you, and more on which debts can't be discharged in a bankruptcy.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
User Comments
Submit questions/comments about this post:
Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
Information provided by Bills.com is for general informational purposes only and is not be
construed as legal, financial, bankruptcy, tax or other professional advice. Should you
require more detailed information or specific professional advice tailored to your situation you
should consult an attorney, financial planner or tax advisor.
While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
© 2006 - 2009Bills.com LLC. All Rights Reserved.
1. Posted by Gerald Bertagna on Sunday 27th September 2009 12:01
Prior to my divorce my wife charged on a joint Visa Credit Card over $10,000. the card had a zero balance prior to her charges. I have been making payments since the divorce. Six months after the divorce my exwife filed chapter 13 Bankruptcy and included this credit card debt. The credit card company has frozen the credit card and stopped sending me statements. They have refused to talk to me about the Credit card bill. I have sent in payments to them for the last two months but they refuse to reply to my inquires. I live in California, Am I still responsiable for this credit card debt ?
2. Posted by Tim Prust on Sunday 27th September 2009 16:46
My e-wife had me on a discover card as an authorized borrower. Which should have been removed 30 days after the divorce. Which she stopped paying on 1 year later. Which was reported to my credit report. Now what do I do? Thanks Tim
3. Posted by Bill on Sunday 27th September 2009 22:14
The Visa account is subject to the "stay" ordered by the bankruptcy court. It is not surprising that your bank is not sending you statements or otherwise communicating with you with the stay in place. I suggest you speak to your divorce attorney about this matter. My guess -- note that word choice -- is that your attorney will recommend you to cease making payments until your ex-spouse's bankruptcy case is finalized and the Visa account in question is discharged (or not). If you are a co-signer (and not just an authorized user) of the Visa account, you are liable for any amount not discharged in a Chapter 13 bankruptcy.
4. Posted by Bill on Sunday 27th September 2009 22:27
Tim, I think you have a bigger problem than a derogatory entry on your credit report. You may be liable for the balance on the Discover card if your ex-spouse has defaulted. I suggest you consult with your divorce attorney to learn your rights in your state if that's what happened here. If not and the account is now current, then I suggest you dispute the listing. See the dispute listing sample letter at the Bills.com Debt Do-it-yourself center.
5. Posted by John on Saturday 7th November 2009 13:17
Along the same lines, my wife has a credit card that I do not have access to use. She uses it to make purchases for herself and the family. We live in a community property state. Since I am equally responsible for the bill, do I have a legal right to the statements? I've talked to the credit card company and they refuse to give me any information since I am not an authorized user. This account showed up on my credit report with a balance of 25K hence my concern.
6. Posted by Bill on Monday 9th November 2009 12:08
This question stumps me. You say you are neither a co-signer or authorized user, but this account appears on your credit report. This is a long-shot, but you mentioned you reside in a community property state. Which one?
Update: The reader followed up with this clarification: The reader was a an authorized user of the account in the past, but had since been removed. In light of this additional fact, it is clear that the credit bureau is uninformed of your new status. Send the credit bureaus reporting this erroneous information a "dispute listing" letter, a sample of which you can find at the Bills.com self-help center.