When you're single, you're responsible for your own debt under most circumstances, unless someone co-signs for you. Marriage complicates debt responsibility. Depending on where you live and what you do with the debt you have, you could end up responsible for some or all of what your spouse owes, even if you had nothing to do with the acquisition of that debt.
Separate Versus Community Property States
Most states are separate property states, also known as common law states. In a common law state, each spouse is responsible for his own debt. Creditors cannot come after you for your spouse's debt in these states, in most cases, so you have some protection against personal financial devastation. Just the opposite is true in community property states, which include Arizona, California, New Mexico, Nevada, Idaho, Washington, Texas, Wisconsin and Louisiana. "Community property" means that you and your spouse are both considered owners of each other's debt. In these states, creditors can legally pursue you for what your spouse owes.
Exceptions to Separate Property
Typically, pre-marital debt remains the responsibility of the spouse who acquired it. Depending on the situation, however, courts may consider you liable for a debt in a separate property state if you refinance or consolidate debt with your spouse so that your name is on the new loans. Any new debt you acquire that includes both your name and your spouse's name on the debt agreement or title is also your responsibility. You accept responsibility for debt on your spouse's credit cards if you and your spouse put your name on the credit card account. Real estate always is subject to the laws of the state in which it is found, even if you move, because you cannot relocate real estate.
Duration of Responsibility
If you have debt from your spouse for which you are responsible, in most cases, your responsibility continues even if your spouse dies. If you also die, your estate becomes responsible for the debt. This usually means that your debt won't pass to your heirs, although having debt may mean there isn't any inheritance for your heirs after the estate covers your debt obligations.
Responsibility for debt also usually continues even though divorce. In common law states, however, you are entitled to a fair portion of marital assets and property. You also can protect yourself, to some degree, with a prenuptual agreement. Getting a fair portion of marital assets doesn't necessarily stop your spouse's creditors from pursuing you, but it means that you'll have more assets available to pay them off.
What You Can Do
The best course of action if you want to protect yourself and your spouse from being responsible for each other's debt in a separate property state is to keep your finances separate. Don't apply for joint financing unless it truly is necessary, and indicate any property you'd like your spouse to have in your will to ensure she has a legal right to it once the estate is settled.
Keeping your finances separate may require you to improve your personal credit rating so you qualify for financing on your own. You can do this by paying creditors in full and on time every month, by paying off as much debt as possible so you lower your debt-to-income ratio, contacting creditors about errors on your credit report, consolidating or refinancing your own debt and diversifying the types of credit you use.
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