Navigating Debt in Marriage: Common Law vs. Community Property States

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Am I Responsible for My Spouse’s Debt?

When you get married, you’re ideally signing up for a lifelong partnership that involves creating a home as a pair and working together toward shared goals. However, one thing you might not look forward to sharing upon marriage is each other’s debts.

Any assets or debts you enter a marriage with are considered your own separate property forever, unless you commingle them with shared funds or add your spouse to the account. However, whether or not you’re responsible for your spouse’s debt incurred after marriage depends on the state where you live and whether you co-borrowed the debt.

Debts you and your spouse incurred before marriage remain your own individual obligations. Exactly how spouses share responsibility for new debts taken on after marriage depends in part on state laws and the type of debt. You are usually responsible for your spouse’s debts accrued after marriage if you became joint account owners or co-borrowed a loan with your spouse, either before or after marriage.

Do You Inherit Your Spouse’s Debt When You Get Married?

If your spouse accumulated debt before marriage, and you didn’t cosign, co-borrow or become a joint account holder, those don’t become shared responsibilities after the wedding. It stays their personal debt and sole responsibility, even if you live in a community property state.

If you cosigned on the debt, however, and your spouse doesn’t pay, you are legally required to repay that debt even after marriage.

The only times you would be responsible for debt your spouse incurred before marriage would be if, after marriage, you sign on to be a joint account holder or you co-borrow a loan. For example, if your spouse had a personal credit card with debt, then added you to the account as a joint owner after the marriage, it’s possible you’d be equally responsible.

Loans taken out jointly, such as for a house or car, remain both your financial responsibilities. But the nuances can vary by state.

Do You Share Debt Incurred During Marriage?

Debt that’s obtained during a marriage is treated differently depending on whether your state abides by common law or community property law. Even if you and your spouse keep your finances separate, the state law has the final say on who owns what.

Note that in this context, “property” is a legal term that isn’t limited to real estate or tangible goods; it also means debts, earnings and financial assets.

How Common Law States Handle Debt After Marriage

Most states use common law (also known as equitable distribution), which dictates that married couples don’t automatically share personal property legally. In other words, you aren’t responsible for your spouse’s debt unless you took it out together as a joint account, or you cosigned on it.

There are a few exceptions. While personal debt remains that spouse’s individual liability, both spouses usually share responsibility for debts for family essentials that benefit them equally. This could include housing, food and tuition for children’s schools. Requirements vary by state, so check your state’s laws or consult a local attorney.

Individual debt, including credit card accounts and loans, is in the name of one spouse only. That person is generally held solely responsible for repaying it, so the spouse whose name isn’t on the debt is protected.

Joint debt may be incurred during marriage in a common-law state if both spouses apply for a loan or credit together. In that case, both spouses’ credit scores are considered in the lending decision, along with both spouses’ incomes and assets. If both spouses’ names appear on the loan (mortgage contract, credit cardholder agreement or auto loan note, for example), both are equally responsible for repayment under common-law rules. If your spouse dies, you will generally only be responsible for debts where you were a cosigner, co-borrower or joint account owner.

How Community Property States Handle Debt After Marriage

Nine states use a different legal framework called community property. In these states, married couples are viewed as jointly and equally owning nearly everything together.

Debt assumed during your marriage is understood to be “community” responsibility, with each spouse under equal obligation for repayment. No matter whether both spouses agreed to the debts, or even whether both knew about them, both are equally responsible to cover them. Assets and income are also considered equally shared. Upon your spouse’s death, you may remain responsible for debt if it was considered community property.

There are some exceptions; for example, inheritances belong exclusively to the person who received it, unless they commingle it in a joint account they share with a spouse.

In Which States Are You Responsible for Your Spouse’s Debt?

Currently, the only states that follow community property laws are:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

Note that in California, Nevada and Washington, community property laws are also applicable to couples who are in registered domestic partnerships. Additionally, Alaska allows couples to opt into a community property arrangement, but it’s optional.

Does My Spouse’s Debt Affect Me?

Getting married doesn’t affect your credit score directly, since credit reports don’t note your marital status. Spouses retain their individual credit reports and credit scores after marriage; there’s no such thing as a combined credit report.

However, there are some situations when your spouse’s debt could impact you:

• Applying for new debt: While you don’t share a credit report, both credit reports and scores are considered when a married couple applies for a loan or credit card together. If you have a solid credit score but your spouse has a poor credit history, that could affect your ability to borrow money jointly. It may be harder to qualify for a mortgage or auto loan, or if you do qualify, you may be stuck with higher interest rates and fees.
• Budgeting together: If your spouse has a significant amount of debt and you budget together, this could put you on shaky financial ground as a unit. Your partner may not be able to contribute as much to savings or day-to-day expenses if a significant amount of their income goes toward debt payments.
• Carrying joint debt: When you take out a loan or a credit card account jointly with your spouse, you’re both equally responsible for the payments, even in community property states. If, for instance, one spouse goes on a spending spree with a jointly held credit card, the other is equally on the hook for paying it, even if they weren’t aware of the purchase.
• Being pursued by creditors: If you live in a community property state and your spouse is facing legal action for personal debts, creditors can often go after joint assets. Remember, other than personal inheritances and debts and assets acquired before marriage, community property states view nearly everything as jointly owned. That means even if your name isn’t on the debt in default, both spouses are considered responsible. Say your spouse took out a personal loan in their name alone after marriage and it goes into default; creditors can come after assets in your name alone if they’re legally considered community property.

The Bottom Line

Couples who live in community property states have far more challenges and liabilities than common law states when it comes to their spouse’s debts and how it impacts them.

One potential way to reduce risk is to get a prenuptial agreement before marriage, or a postnuptial agreement after marriage. This overrides most community property laws and generally allows you to treat your income, assets and debt as separately owned. It isn’t foolproof, as some creditors can still pursue you for debt from your spouse, but it’s a helpful way to provide both partners some protection and peace of mind in a community property state.

If you live in a common law state, you have less risk since your spouse’s solo debt isn’t your responsibility. Just remember that if you share loans or credit cards with your spouse, you’re both equally on the hook. Should your spouse make poor decisions, like carrying too high of a balance or missing bills, it can impact your credit too.

Regardless of your state’s laws, it’s beneficial to regularly monitor your credit to keep an eye on all accounts you’re named on and be aware of how you and your spouse’s actions impact your credit score.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you navigate your financial journey with ease and expertise.

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