Does Debt Affect Your Spouse?

The fact that you're conscious of how you spend your money and don't accumulate a lot of debt doesn't necessarily ward off money and debt problems. Being married to someone who carries high balances on credit cards or takes out several loans can have an impact on your finances and credit.

Co-Borrowing or Co-signing

It's not unusual for a person to help his spouse get financing for a loan. The spouse applying for financing may not have the best credit score or enough income, and the other spouse agrees to co-sign or become a joint applicant. There's nothing wrong with helping a spouse get a loan. But completing a joint loan application makes both spouses responsible for the balance, and if one spouse doesn't pay, the other must make the payments to keep his credit in good standing.

Marriage and Debt

Spouses are protected from each other's credit woes if they never co-sign or complete a joint application. Some couples keep their finances and credit separate. In other words, they may not share credit cards, banks accounts and loans. This option can protect spouses. For example, if a husband has a credit card in his name only, and he accumulates thousands of dollars of debt, the wife isn't responsible for this debt because her name isn't on the account. If the husband defaults, the credit card company cannot sue the wife or make her pay his debt.

Community-Property States

In certain states, the above scenario doesn't apply to spouses. If you live in a community-property state (California, Louisiana, Idaho, Wisconsin, Arizona, New Mexico, Washington, Nevada and Texas) the majority of debts incurred during the marriage become the responsibility of both parties. For example, if a husband applies for a car loan in his name only after marriage, and then defaults on the loan, the auto lender can sue both him and his wife for repayment.

Considerations

While the majority of states do not hold individuals liable for debts incurred by a spouse, these individuals must satisfy any debts upon the death of their spouse. Some loans have riders that pay off the debt if the primary account holder dies. But if the borrower did not request this benefit, the surviving spouse is responsible for paying off any loans or credit cards in the deceased person's name.