One of the common questions we get from people concerned about their financial pressures is: “My spouse has a ton of debt. Am I legally responsible for this debt because we’re married?”
An excellent question. The simple answer to this is “no, you are not legally liable for your spouse’s debt just because you are married to that person.” To truly determine if there is any liability, ask yourself (and your spouse) the following questions:
- Did I sign the loan agreement when my spouse took out the loan? In order for you to be on the hook for the debt you must have signed the loan agreement. If you did, this is known as joint debt. To confirm, check your current loan statement. If it’s in both your spouse’s name and your own name then it’s a joint debt and the lender has the right to request 100% repayment from one or both of you.
- Did my spouse (or did I) request a secondary credit card from the lender? It is quite normal for an individual to submit an application for a credit card and on the application check off the box indicating they would like a secondary card for their spouse. In these situations the spouse may not even have to sign the application to be responsible for debt associated with that card. In fact, we’ve seen many situations where someone was not aware their spouse had requested a credit card in their name.
Another example is a couple excited about their upcoming wedding. Let’s pretend that just before tying the knot you discover your fiance owes a significant amount of debt you were not told about prior to your wedding day. Will the marriage ceremony occur? And if it will, do you willingly assume legal responsibility for your new spouse’s debts once rings are exchanged? Keep in mind that just because two people get married it does not mean the other person automatically takes on responsibility for their new spouse’s debts. Those debts remain the responsibility of that individual.
One very common example is for banks and other financial institutions (the “Lender”) to request another person (usually a family member) take responsibility for the loan debt by co-signing the paperwork. The contract, once signed, acknowledges that both people agree to be 100% responsible for the debt. You see this a lot on mortgages, car loans and unsecured lines of credit or installment loans.
In the previous examples, the debt is generally easily confirmed as a joint debt from the names appearing on the loan agreement or monthly statement. It is possible however, that in certain circumstances a person may be legally responsible for a debt as a result of their actions – even if they did not sign the original credit agreement.
For example, credit cards arriving in the mail will come with a Credit Card Agreement which specifies the terms and conditions for use of the card. By signing the back of any supplemental card and then making a purchase with the card you acknowledge you are accepting responsibility for all purchases made on the card. More specifically, you are not only responsible for any purchases you make, but also any purchases made by your spouse even though you did not directly apply for the card but used it once it arrived to make purchases for the benefit of everyone in a family.
In these situations the credit card statement may only show the name of the primary card holder. This unfortunately leads many spouses to believe they are not responsible for the debt if their name is not on the monthly statement.
We understand and appreciate that everyone in a family will feel financial pressure regardless of who is legally liable for the debt. Some research is often needed to determine if only one person is liable for what is recognized as family debt.
That’s where we can help. At Farber, our licensed professionals help families empower their lives financially. A free consultation and review of your situation can help clarify who is responsible for each debt and also outline the best solution moving forward for you and your spouse. It may be that only one spouse needs to consider a discussion with us to formulate a plan of action, allowing the second spouse to keep their credit rating intact.