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Michigan Spousal Liability for Debt

Can a credit card issuer garnish my spouse's wages if I default on my credit card payments?

Can a credit card lender garnish my spouse's wages if I default on any of my credit cards? I live in Michigan.

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Highlights

  • Spouses share liability for most debts in community property states.
  • Spouses have no liability for each other's debts in common law states, generally speaking.
  • Close any joint bank accounts and use separate accounts only.

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.

You mentioned you reside in Michigan. Michigan is a common law state regarding family law. In other words, Michigan is not a community property state.

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.

If you and your spouse are Michigan residents and were residents when you incurred the debt, then the rule I just outlined applies to you. However, if you resided in a community property state then more complex rules apply.

Spousal liability in community property states

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and 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.

Bankruptcy

People with significant debt often consider 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.

Recommendation

If you live in a community property state you have a theoretical liability for your spouse's debt. If the judgment-creditor is particularly aggressive this will have a negative impact on you. If you live in a common-law state (Michigan, for example) the non-debtor spouse should have no liability.

Beware joint accounts. A judgment-creditor may have the right under your state's laws to seize the funds in any joint accounts owned by the judgment-debtor. For this reason, I do not recommend joint accounts. If you have a joint account with a judgment-creditor, then working in concert with the judgment-creditor, close the account. Open separate accounts with separate tax ID/Social Security numbers. If you need to transfer funds between the accounts, your bank or credit union will almost certainly allow you to do so electronically.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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8 Comments

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  • AS
    Oct, 2011
    Angelique
    Dearborn Heights, MI
    My question is, in the process of divorce with my husband of 15yrs. We brought cars and a house, his credit wasn't good so I was able to purchase the home. I was laid off from one of the big 3 in 2005, haven't had a consistent job since on/off unemployment which the husband took on most of the bill paying. We were getting by, slow payments but house payment was made, if there was ever an issue I always spoke to our mortgage company. In Oct 2010 I asked for divorce, was laid off from a position in which the husband started not making payments to the mortgage. Now the house is in foreclosure status I’m working to save my house, but he still lives in the house. Now with the process of the divorce underway, my question is can I sue him to be held as much responsible for the house? The status of the house is on my credit is holding me back from getting anything, what can I do?
    0 Votes

    • BA
      Oct, 2011
      Bill
      Filing a lawsuit against a spouse you are divorcing may not be a productive legal tactic.

      I am reluctant to weigh in with an opinion involving a reader's division of marital assets. Consult with a lawyer in your state of residence who has family law experience. He or she will interview you and look at the assets and liabilities for which you and your spouse have responsibility, and give you a precise opinion based on your state's family law.
      0 Votes

  • MH
    Feb, 2011
    mandy
    Grand Rapids, MI
    Im thinking this has helped me, so I live in michigan I have a credit card and some medical bills out there that are only mine and B4 my fiance we have been together for 5 yrs and have 2 young children together and really want to get married but Im afraid that ppl will try to take his $$ for my stupidity B4 him and I really do not want it to be put on him that is my problem to deal with thus I do not want him to suffer for it.. So another words we can go get married and be just fine? thanks mandy
    0 Votes

    • BA
      Feb, 2011
      Bill
      Do not open any joint accounts. If you have joint accounts, close them and open separate accounts at a bank or credit union where you can transfer funds to each other's accounts electronically. Consult with a Michigan lawyer who has experience in family law or consumer law to discuss your debt situation.
      0 Votes

    • HP
      Sep, 2011
      Harry
      Muskegon Hts, MI
      What about joint ownership of property like cars and house. Wife came from North Carolina to Michigan and had home equity loan before we got married. Now collectors are trying to get that back from her, This loan is on her own I have nothing to do with it, we both live in Michigan now. What should we do?
      0 Votes

    • BA
      Sep, 2011
      Bill
      Michigan is not a community property state, so Spouse A has no liability for Spouse B's separate debt. However, let us say that Spouse B's creditors file a lawsuit against Spouse B for delinquent debt. The creditors are successful, and are awarded a judgment against Spouse B. Let us say that Spouse B and A have a joint financial account. The judgment-creditor has the right to levy (sometimes call an account garnishment) the joint account because Spouse B's name and Social Security number are connected to the account. The same is true for liens on jointly titled property, including real estate and vehicles. What about Spouse A's separate accounts and separately titled property? Those are not connected to Spouse B, and are not subject to account levy or liens.

      You asked what to do. Spouse A and B should close any joint accounts, which are more trouble than they are worth anyway. Transfer the title of any jointly titled real property to Spouse A. Do the same for any titled personal property, such as vehicles.
      0 Votes

    • MP
      Oct, 2011
      Mike
      Muskegon Hts, MI
      Hi I live in Michigan have involve in business partnership which we lost.I got judgment against it. I am also have 20% partner ship in two more business which has corporation.my question is can collector can take my 20% partner ship from my other business partnership ?
      0 Votes

    • BA
      Oct, 2011
      Bill
      You need to speak with an attorney to find out what assets that you own are vulnerable to the judgment. The judgment creditor may or may not be able to pierce the corporate veil to come after your 20% ownerhip. Discuss this and whether the judgment-creditor can garnish any income that comes from the existing partnership.
      0 Votes

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