When many couples get married, they merge together different parts of their individual financial lives. In fact, the U.S. government gives financial incentives to married couples - like tax breaks. But taxes and new joint banking and credit accounts are not the only things spouses share. You and your spouse will most likely take on new debt together, and it's important to understand how this works before you and your partner tie the knot.
Who is Responsible for Pre-Marriage Debt?
Debt incurred by each individual on their own, that debt is solely the responsibility of the person that incurred it. So, say you have $10,000 in student loans in your name when you get married. Once you're married, your partner is not responsible for any of that debt.
The exception to this is if one of you cosigned for the other person or if you opened a joint credit card account prior to marriage. Like with any cosigner arrangement, cosigners are treated as being equally responsible for paying off that debt. For example, if you cosigned on a car loan to help your partner qualify before marriage, you are share a legal responsibility for that debt. Similarly, if you and your partner opened a joint credit card account prior to getting married, you are both still equally responsible for the balance.
What About Debt After Marriage?
Once you're married, the rules of debt liability change a little. Now, cosigning and joint credit card accounts still share liability the same as before marriage. But whether you are liable for debt incurred during marriage that is only in one of your names depends largely on where you live.
Community Property States
If you live in a community property state, most debts incurred by only one spouse may still be treated as belonging to both spouses. These nine states have community property laws:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
Each state has its own specific rules regarding which debts are considered community property, thereby making both spouses jointly responsible. For example, you and your spouse want to buy a home in California, but your credit score is low so only your spouse's name will be on the mortgage. Because California is a community property state, your own debts must be considered as part of your spouses liabilities when getting approved for a mortgage, even though you are not on the loan at all.
Common Law States
The remaining forty one states are common law states, meaning individual debt incurred after marriage is usually still treated as being separate and only belonging to the spouse who incurred it. The exception is debts only in one spouse's name that benefit benefit both partners, such as credit card debt if the card was used to pay for basic, shared needs like food and shelter.
Implications of Sharing Debt in Marriage
There are big reasons to understand what debt you are responsible for after marriage. First, there could be consequences if debt goes unpaid:
Cosigned debt or joint account: Late or negative payments could affect both of your credit reports and score, and you are both responsible for the outstanding debt.
Debt held by just one spouse, in a community property state: Creditors could seek to attach jointly held assets to cover the debt owed by just one spouse. It could be bank accounts or any real property you own together.
And second, if you and your partner divorce you might still be liable for debts introduced during the marriage. In community property states, you and your spouse would not be liable for debts you individually incurred before the marriage, but debts incurred during the marriage might be divided equally between you depending on the divorce laws in your state. In a common law state, it is typically up to the divorce courts how marital debts are split.
The Bottom Line: Discuss Debt Before Getting Married
Before you enter into a legal union, it's a good idea to talk to your partner about your financial situations so you understand how much debt you have collectively and who is responsible for which debt. This is also a good opportunity for you two to set up plan on how to pay off your debts. It's not always an easy conversation, but it's an important one to set you up for a health marriage and joint financial future.