Spouse’s Debt – Do you have to pay for it?
Does tying the knot means entangling your debts?
Are You Responsible For Your Spouse’s Debt?
When it comes to marriage, many people focus only on love and passion. They ignore more serious issues, such as how a spouse’s debt will affect one another after they are married. So, does getting married makes you responsible for your spouse’s debts?
Well, the answer is no. You are not responsible for any debts your spouse takes out before marriage. This can include major debts like student loans. You also aren’t responsible for your spouse’s credit card debt before marriage.
After you get married, you are only responsible for your spouse’s debt if you and your spouse open a joint credit card or co-sign a loan. If both of your names are on the credit card’s account, you are responsible for paying off any debts that your spouse has on that credit card and vice versa.
Key highlights
- You are not responsible for any debts your spouse takes out before marriage.
- You are only responsible for your spouse’s debt if you and your spouse open a joint credit card or co-sign a loan.
- Your credit will generally not be affected by your spouse’s debt.
Can Your Spouse’s Debt Impact Your Credit?
In most cases, your credit will not be affected by your spouse’s debt.
Your credit score will not be impacted as well. If your credit score is high and your spouse is low, their credit score will not bring yours down. Just because you get married doesn’t mean your credit score will get average. You and your spouse will still have separate credit histories.
There are, however, situations where spousal debt has an effect on your credit.
For example, if you and your spouse apply for a joint loan, mortgage, or credit card, the lender will check both credit scores. You will probably get offered a higher interest rate if your spouse has a lot of debt or bad credit.
What Happens to Joint Credit Accounts If You Get Divorced?
Since credit card companies don’t care if you are divorced, you are responsible for any debts on a joint cred account if you are no longer married to the other person on the account and your name is on it.
It is best to pay off and close all joint credit accounts before you finalise your divorce. If you don’t do it, your former spouse may continue to rack up debt on the joint accounts, causing your credit score to go down if the debt isn’t paid off.
Choosing to open a joint account can be a wise move, as it gives each partner equal access to the funds and makes it easier to coordinate bill payments and other costs.
What Happens If Your Spouse Passes Away?
Dealing with the loss of a partner is painful enough, and sometimes people wonder if they’re going to have to deal with the debts of their spouse as well. In most cases, you should not have to cover the debts of your deceased partner unless you are a co-signer on a loan or a joint account holder on a credit card. Legacy occurs after a person dies, and that person’s legacy is automatically passed over to the heir. The debt is inherited, and it is the duty of the creditors to repay the debt. If the partner passes away, it is the heir’s duty to repay the loan.
As with anything in marriage, achievement in managing the finances begins with strong communication.
How Can You Reduce Your Responsibility For Your Spouse’s Debts?
As with anything in marriage, achievement in managing the finances begins with strong communication. It’s important to chat about money on a regular basis and be transparent and truthful with each other. If you’d like to reduce your responsibility for your spouse’s debts, avoid co-signing loans with your spouse. Avoid opening joint credit cards and avoid opening joint bank accounts either. With joint accounts, your spouse could withdraw part of your paycheck to pay down their debts. If your partner may not have a lot of debt but has poor credit habits, such as late payments, talk about ways to change those habits. That way, your spouse’s credit score will improve, and you’ll get better interest rates on any joint debt you’ll get in the future.
Discuss Debt Before Getting Married
It is a good idea to discuss debts and your financial situation in general before getting married. Doing this will help you both understand how much debt you have as a couple and who’s responsible for which debt.
Make a list of all the debts, large or small, and place it on the table. Credit card balances, student loans, car loans, whatever it is, write it all down. Add the amount you pay per month on these debts to the list so that you can add them to the budget.
When you get married, share your credit scores with each other and explore ways to boost or maintain them. Your credit score lets lenders assess the risk of your ability to repay your debt. Your score may have an impact on your access to credit and lower interest rates. If one of you has superior credit, you might consider adding the other to an existing credit card account—capitalising on a good history that one partner has earned to improve the other’s credit score.
Set up a household budget that helps you to pay off your debt and plan your expenses. Decide together how to deal with each debt. When you have a clear understanding of the choices for debt relief, set a common target to get there. Debt-free in three years? Increase your credit score by next year? Looking to buy a house, raise a family, or buy a car? Set up a joint plan to get there so that you can set more financial targets.
See how you’re supposed to handle common finances to stop letting spousal debt hurt your relationship. Taking the right steps will help to boost your finances and, most importantly, your marriage. Getting married doesn’t immediately qualify you for a more enviable mortgage. Both individual credit scores, income, and debt loads are all counted. Being married gives you a greater choice in trying to get a decent interest rate or trying to qualify for a bigger loan. But if one of you has a bad credit record, it’s not really a smart idea to apply together. The lenders will consider both of your incomes, and the two incomes are bound to be higher than one, and the higher total income will often qualify you for a bigger loan with better repayment rates than you can afford on your own.