Money is often one of the most contentious issues in relationships, and financial issues are often cited as one of the leading causes for divorce.
When you are considering marriage, factoring in how you both approach money is important, since incompatibility around finances can stress a relationship to the point of fracture.
Another thing you might consider is what the laws are when it comes to marriage and debts. You might be shocked to learn that in some states, any debt your spouse racks up while you are married is also considered your debt.
But what if your partner racks up debt behind your back? Or after you’re separated?
Imagine Lisa, for example, who separated from her husband Brad four months ago. They rented their shared home, and mostly kept their finances separate, except for a joint credit card that they used for household purchases. Lisa’s savings and other accounts are separate, and she has about $20,000 saved.
When Brad moved out of their shared home, Lisa called the credit card company and cancelled the joint credit card. But when she recently got her credit report, she discovered three credit cards in her name that she didn’t apply for. The cards were maxed out, with a total debt of $45,000. Lisa called the credit card companies and found that one of the bills had been sent to collections.
This scenario is many people’s worst nightmare, which is why it’s important to have a grasp on the laws related to joint finances and property before you get married.
In common law states, which covers 41 states, property owned before the marriage is considered separate, and any property acquired during a marriage is not automatically considered to be owned by both parties (1).
In states with community property laws, property and debts acquired during the marriage are owned equally, however, property owned before the marriage, as well as debt, are not considered to be owned by both parties (2).
So, if your spouse racks up debt in a community property law state, you could be liable for it. In a common law state, you could be liable for a spouse’s debt if you co-sign a loan, it’s a joint account or if the debt incurred was for joint property or essential goods for your family (3).
According to Justia, debt incurred after a separation but before a divorce is final may be treated “as that spouse’s separate debt.” But, this depends on the state’s laws and when a court officially recognizes the date of separation (4).
Justia also notes that although a divorce decree will state who is responsible for each debt, the decree “does not alter your original contract with the creditor.” So, if your ex doesn’t pay a debt, the creditor can still pursue you for payment (4).
Read More: 8 essential money moves to make once you’ve saved $10,000
Read More: You can now invest in this $1B private real estate fund starting at just $10
If you were in a situation like Lisa’s, being completely unaware of debts piling up in your name, the first step you could take is placing a freeze on your credit with all three credit bureaus. You could also place a fraud alert on your credit reports — both freezes and fraud alerts are free (5).
Opening credit accounts in someone else’s name without their knowledge is fraud, and when a romantic partner does this, it’s referred to as coerced debt (6). Clearly, this is much different than debts incurred on a joint credit card that both parties were aware of.
If you were in this scenario, you could consider reporting the identity theft to the Federal Trade Commission and to local police. However, this can be a difficult step when identity theft is committed by someone you know. If your romantic partner is abusive, it can also be dangerous to take these steps.
The Center for Survivor Justice and Agency (CSJA) says that “if a survivor is living with the abusive partner or believes they might be in danger of retaliation, he or she should take additional precautions” (7).
The CSJA says that while filing a police report is not required, it is recommended. Sending these documents should trigger the credit bureaus to open a dispute, remove the fraudulent accounts and relieve the victim of responsibility for the fraudulent debts (7).
If creditors don’t remove the accounts, you can write a credit report dispute letter to the consumer reporting agency and include copies of the police report (7).
Recovering from this kind of scenario also means taking precautions such as changing your passwords for your email and financial accounts, changing ATM pins, the mailing address associated with existing bank accounts or possibly changing financial institutions altogether.
Having to handle all of this amidst the end of a marriage is no small feat, but it is important if you want a fresh start, absolved of debts that should not be your responsibility.
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
FindLaw (1); Stimmel Law (2); Nolo (3); Justia (4); FTC (5); CSAJ (6), (7)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
