- Residing in a community property state bought you a ticket to an anti-lottery.
- Creditor can collect 100% of debt from either spouse.
- Consult with an attorney who can review your details.
I married someone with significant debt. Do I have liability for the debt?
My husband and I married in feb. in Wisconsin. I learned that he has $12,000 in credit card debt and also about $40,000-50,000 in student loans for his ex girlfriend. I'm wondering if the credit card companies can come after me legally for the amounts since it was before we were married. Can the credit card companies try and make me pay for the debts out of my pay checks even though the debts were before we were married and we have separate checking accounts? The summons are rolling in and I want to know what to expect and what I can do.
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, and Wisconsin.
If the spouses now live in a community property state, or lived in one at the time the consumer debt account was opened (whether it be a credit card account, or vehicle loan), the non-signing spouse may have incurred liability without signing a 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. Think of it this way: By marrying a spouse with debt and residing in a community property state you bought a ticket to an anti-lottery. Your chances of losing are small, but you risk that your number may be called.
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, then the signatory-spouse is liable for the debt only. Conversely, the non-signatory spouse does not share in his or her spouse's liabilities in non-community property states.
Be aware that customer service representatives at the creditors may try to convince you that you have liability for the debt. Do not believe legal advice from anyone trying to collect money from you, unless they are your attorney. Legal advice from collection agents is usually incomplete or wrong, and is always self-serving.
More on Wisconsin law
To learn more about your rights under Wisconsin law, see the Bills.com resource Wisconsin Collection Laws. Consult with an Wisconsin attorney to learn your liability for your spouse's debt. I see potential liability for you based on the information you provided. However, there may be significant facts you did not include in your message that would result in a different conclusion.
I hope this information helps you Find. Learn & Save.
Did you know?
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2023 was $17.06 trillion. Auto loan debt was $1.582 trillion and credit card was $1.031 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 Arkansas, 15% have student loan debt. Of those holding student loan debt, 10% are in default. Auto/retail loan delinquency rate is 5%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.