Know your liabilities if you’re marrying someone with debts.
Finding the person you want to spend the rest of your life with is a wondrous feeling, but that head-over-heels elation can distract you from the important questions you need to ask before deciding whether to marry that person.
Sharing your life means sharing the good and the bad, and that includes your finances. If you or your partner have existing debts, it’s important to know how your marriage will affect those financial obligations.
Community property rules
One of the main factors in determining whether you are liable for your newly married spouse’s debt is not the type of debt, but where you live. Most states treat existing, nonshared debt as an individual obligation, often referred to as common law, but a handful of states follow community property laws.
In some states that follow community property rules, debt incurred during a marriage can be treated as the equal responsibility of both partners, even if one spouse did not co-sign on the loans. These states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Depending on where you live, you may need to be prepared to share responsibility for your partner’s debt even after a divorce.
Student loan debt
If your partner took out loans to pay for college before you were married, you will not be responsible for your partner’s student loan debt once you’re legally joined. However, that doesn’t mean your marriage won’t be affected by student loan debt or vice versa.
If the debtor is enrolled in an income-based repayment plan, your combined household income could dramatically affect that repayment arrangement. You may be able to work around that by filing your income taxes separately, but separate filing can affect more than student loan debt. Be sure to review all penalties and deductions before deciding.
If your partner returns to school after you marry and takes out loans to pay for it, you could be responsible for repayment. Student loan debt taken on during marriage may result in the spouse being contacted by creditors if the debtor defaults, especially if the spouse is a co-signer.
Credit card debt
If you are worried that your future partner’s credit card debt will become your responsibility, you usually do not have to be concerned. Unless the credit card is a joint account with your name attached, the debt will not become yours when you marry. Most states track credit card debt by Social Security number. The main complication may occur if you live in a community property state and the credit card debt is incurred during your marriage.
The same generally applies to medical, automotive, and other types of debt. Debts incurred by your spouse are not your responsibility unless you live in a community property state or are otherwise legally connected to the account.
A mortgage
You are generally not responsible for your spouse’s mortgage if you are not a co-signer on the loan or documented as a co-owner of the property. However, the lender can foreclose on the home you are living in with your partner if they do not repay the mortgage on time. If you inherit the property from your partner, you may also become responsible for paying off the remainder of the loan, especially if you sell it through a reverse mortgage.
If you are uncertain about how the law may affect your financial situation, discuss your debts with a financial advisor.
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