Marriage may be a union of two people, but not every aspect of a person's life is absorbed into the marriage. The treatment of one spouse's debt, for example, varies depending on state laws and when the debt was incurred. In some instances, a spouse may be responsible for the other spouse's debt.
Premarital Debts
Spouses should check the relevant state laws to determine specifically how premarital debt liability is handled. In general, debts incurred prior to the marriage remain with the spouse who incurred them; the other spouse is not liable for the premarital debts of the other spouse. According to SmartMoney.com, the spouses should keep separate financial records and do their best to use separate assets --- as opposed to jointly held assets --- to pay off premarital debts.
Debts Incurred During the Marriage
Responsibility for debts incurred during the marriage varies depending on whether the state is a community property state or not. The community property states --- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin --- treat debts incurred during the marriage jointly; both spouses may be liable for debt. Nolo.com points out that couples can sign pre- or postnuptial agreements that, among other things, state the debts of each spouse are to remain separate property. In other states, debts incurred by one spouse alone typically remain that spouse's responsibility. Exceptions exist if the debt was incurred for family expenses or other necessities.
Effect of Bankruptcy or Collection Efforts
Bankruptcy and collection efforts can have an effect on jointly held property, even if the other spouse is not liable for the debt. Joint property is, in general, property acquired during the marriage or property bought jointly by both spouses. Even if the debt is incurred solely by one spouse, the creditors or bankruptcy proceedings can still look to joint property of the marriage since the debt-incurring spouse has an equal right to that property. The separate property of the non-debt-incurring spouse will not generally be affected.
Effect of Divorce
During a divorce, the court will typically attempt to differentiate between separate debt and jointly held debts. A separate debt incurred for family purposes may be considered joint debt and split between the spouses. Nolo.com uses an example of one spouse incurring debt to fix a leaky roof on the marital home. Under Oregon family law statutes, debts incurred for child or educational expenses may also be considered jointly held debt. Spouses should consult with a family law attorney to determine exactly how their debts will be treated.
0 comments:
Post a Comment