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When You May Be Responsible for Your Spouse's Debt
Both spouses must repay a debt when both sign the loan contract as joint borrowers. When only one spouse signs a loan or credit card contract, however, the other spouse may or may not have liability for the debt.
Four factors determine if you have liability for your spouse’s debts:
- Your state of residence
- The type of debt your spouse owes
- When the debt was incurred
- Any agreement you two signed before marriage
This article reviews each reason why you may have liability for your spouse’s debts. Let’s start with the state law question.
When it comes to family law, states follow two schemes; Community property and common law. Whether you live in a community property or common law state is the most important factor to determine if you have liability for your spouse’s debt.
|Community Property States|
Spousal Liability in Common Law States
Spouses living in common law states do not have liability for the other spouse’s debt, as a general rule. But if you reside in a common law state you can’t stop your analysis here, because other factors may come into play. For example, if you lived in a community property state when your spouse signed the contract, you may have liability for the debt.
Spousal Liability in Community Property States
Spouses living in a community property state, or who lived in one when the spouse opened the account, may share liability to pay the debt. This may be true even though only one spouse signed the credit contract as co-debtor.
In community property states, the general rule is both spouses have liability when:
- The debt was incurred during the marriage, and
- The debt benefited both members of the marriage, and
- The creditor sues the non-signing spouse who loses the lawsuit and has a judgment filed against him or her
A creditor who wins a judgment against both spouses can collect from either spouse. The creditor does not have a duty to “even out” the judgment liability between the spouses. A creditor may collect up to 100% from either spouse who is listed on the judgment, whichever is more convenient for them.
As a practical matter in community property states, creditors tend to avoid suing both spouses, as doing so complicates the process of obtaining a judgment. However, this does not mean an 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. Your state’s laws may vary from the general rules. Therefore, consult with a lawyer in your state who can review the details of your situation and give you accurate advice about your rights and liabilities under your state’s laws.
The Type of Debt Your Spouse Owes
In either a community property or common law state, you may need to pay your spouse’s debt if:
- The debt was a necessity, such as required medical care, and
- Your state follows the doctrine of necessaries
Most states require spouses to pay for the necessary care for each other. This is called the doctrine of necessaries or doctrine of necessities. However, in some states such as Florida, state courts struck down this doctrine and do not require spouses to pay for each other’s care. Consult with a lawyer in your state who has family or consumer law experience to learn if the doctrine of necessities applies to you.
Many states have laws that do not require a spouse to have liability for debts related to an unfaithful spouse’s luxuries. A typical example of this is where a spouse buys jewelry for his or her paramour, courts will not give the jilted spouse liability for the debt related to the paramour’s gift.
When the Debt Was Incurred
Pre-marital debt is usually considered separate debt in both common law and community property states. Of course, if the debt from a joint account, both signers of the account share liability for the debt.
If the spouses were residing in a community property state when the debt was incurred, and then moved to a common law state, then the debt may be treated as a community debt. In other words, a court may consider both spouses liable for the debt, even though the spouses now reside in a common law state. This is a tricky area, so consult with a lawyer in your state if you have a mixture of community property debt and common law debt.
An ante-nuptial agreement can alter the rights of spouses when it comes to their debts and assets. You or your spouse may promise to pay a debt, even though your state’s law doesn’t require you to do so. If you or your spouse promise before marriage to pay a debt, then a court may find you are obligated to do so.
It is important to note ante-nuptial agreements are binding on both spouses, but are not binding on third parties. A creditor need not pay heed to a pre-nuptial agreement.
Struggling with debt? Contact one of Bills.com’s pre-screened debt providers for a free, no-hassle debt relief quote. Recovering from debt might be cheaper than you expect.
Beware Joint Accounts
A judgment-creditor may have the right under your state’s laws to seize the funds in joint accounts owned by the judgment-debtor. For this reason, Bills.com does not recommend joint accounts. If you have a joint account with a judgment-debtor, then close the account. Open separate accounts with separate tax ID/Social Security numbers. If you need to transfer funds between your accounts, your bank or credit union will almost certainly allow you to do so electronically.
Learn Your Rights and Liabilities
Go to the Bills.com Collection Laws & Exemptions by State resource to learn the top-level collection law basics for your state. Do you live in a community property state? Click-through to your state to learn more about the collections laws for your state.
Consult With a Lawyer
If you or your spouse are sued, or you are reasonably certain you are about to be sued, consult with a lawyer in your state who has consumer law experience. Your lawyer will spell out your liabilities, and help you decide what actions you can take to protect your household’s assets. If you cannot afford a lawyer, find a legal aid organization that can help you.
Bills Action Plan
Your state’s laws have a large influence on whether you need to pay your spouses’s debts, but there are three other factors in play, too, you need to keep in mind.
Follow these steps if your spouse is sued, or is about to be sued for a debt:
- Learn your state’s laws
- Analyze the type of debt: You may have liability if it’s medical or similar care and support debt
- Get legal advice if you live in a community property state
- Avoid joint financial accounts
Struggling with debt?
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q3 2023 was $17.291 trillion. Housing debt totaled $12.489 trillion and non-housing debt was $4.802 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in New York, 16% have student loan debt. Of those holding student loan debt, 7% are in default. Auto/retail loan delinquency rate is 3%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.