Whether you’re getting married or considering divorce, it’s important to know if you’ll be inheriting your spouse’s credit card debt.
More than 40% of couples who are married, in a civil partnership or living together have only joint bank accounts, according to Bankrate. Though there’s nothing wrong with sharing funds in a relationship, combining financial accounts can create issues if partners aren’t on the same page about money.
While you can’t inherit the credit card debt your spouse accumulated before you got together, those balances can easily become problematic. And you could be liable for your spouse’s credit card debt during a marriage -- but that all depends on the state you live in and if your account is shared.
Do you inherit debt when you get married?
The debt your spouse incurred before marriage remains an individual obligation in most cases. The credit card debt your partner previously racked up is their own, and you won’t be legally on the hook to pay it off once you start a relationship.
Still, partnering with someone who has considerable credit card debt and other bills can make it more difficult to share living expenses. If the debt pattern continues into your marriage, you could become legally responsible for any money owed, especially from combined accounts.
Do you have to pay your spouse’s credit card debt once you’re married?
As a general rule, you’re not responsible for your spouse’s debts during marriage. However, there are scenarios where you can be held responsible for a spouse’s credit card debts depending on the state, according to attorney Ben Michael of Michael & Associates in Austin, Texas.
If you live in what’s considered a “community property state,” the debt of either partner could be regarded as a shared marital responsibility, and as a spouse you’d be responsible for repayment.
If you don’t live in a “community property state,” the most common instance in which you’d be obligated to pay is if you are a co-signer on your spouse’s card or loan, or if you have a joint credit card with your spouse, Michael noted.
Being a co-signer or joint account holder with a partner is different from being an authorized user. Authorized users have a card with their name on it, but they are not legally responsible for repayment. If your spouse is an authorized user on your credit card, they can rack up charges, but technically they might not be responsible for paying back any money owed.
When are you responsible for your spouse’s debts?
Since state law determines if assets and debt acquired in a marriage are considered community property, check the laws in your state to determine if you’re liable for your spouse’s debts.
Generally speaking, “community property states” treat all debt incurred during a marriage as belonging to the couple, and debt is usually split 50-50 between spouses, according to financial planner Olivia Brooke Summerhill. However, the lesser-earning spouse may pay less than 50% of the debt because that is more equitable, she said.
Meanwhile, “common law states” treat debt incurred individually by spouses as their own separate debts (with some exceptions).
In which states are you responsible for your spouse’s debt?
Nine states are currently listed as “community property states” where you can become liable for a spouse’s credit card debt during marriage, even if you’re not a joint account holder. These states include:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
Three of these states -- California, Nevada and Washington -- treat domestic partnerships with the same rules.
A handful of other states -- Alaska, Florida, Kentucky, South Dakota and Tennessee -- let spouses opt into a community property system or treat some assets as community property, although they typically have to create a special type of trust to form this type of agreement.
Are you liable for your spouse’s debt after divorce or death?
If you get divorced, your legal responsibility for your ex-spouse’s debt depends on state laws and any prenuptial agreements you signed. If you’re a co-signer or co-borrower on a loan with your ex-partner, or you have a joint account with them, you’ll be liable for repayment regardless of the state you live in.
When couples divorce, they can split debts and assets however they see fit as long as they can agree, according to Summerhill. That could mean paying off joint debt or dividing the debt equally between partners, for example.
“If you can come up with an agreement, you bypass any of the laws about debt,” she said.
In the event of death, a surviving spouse could inherit debt if they live in a state where there is shared ownership for marital debts, or if they are a joint account holder or co-signer on an account.
Generally, if your spouse dies with outstanding debt, it’s usually covered by any money, property or assets left in the estate.
However, if your deceased spouse left no money or assets behind, or the estate can’t cover those repayments, those debts are often left unpaid, and you may not be legally responsible, according to the Consumer Financial Protection Bureau.
FAQs
If you have joint credit cards or loans with a spouse and both of you fail to make on-time payments, both of your credit scores can take a hit. The same is true if you have a joint loan that goes into default.
To find out laws regarding debt based on the state you live in, you’ll want to contact your state attorney general’s office or check their website.
Community property states generally treat all debts and assets as shared between spouses. Most states use common law instead, which lets spouses own property individually and have their own separate debts they are liable for.
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