If you are like the typical marriage-age adult, odds are you’re no stranger to debt. You probably have some balances on credit cards, and might hold student loans or have financed a vehicle. Or maybe you’re behind on a medical bill, owe third-party collectors, the IRS, or friends and family members. The more debt you have and the longer you’re delinquent on payments, the worse it is to deal with. When you’re single no one but you will be affected by that misery. You can struggle with it all in secret. However, when you add a spouse to the mix, complications naturally arise. The fact is, you will be bringing all those creditors and liabilities into the marriage. Such unwanted financial guests can result in serious relationship damage.
But first, some good news. As a general rule, any financial obligation that you acquired prior to marriage remains yours alone. A debt doesn’t suddenly become your partner’s legal responsibility after tying the knot.
Even if you fail to satisfy a bill and the account goes so past due that the creditor sues you for damages, your spouse’s name will be left out of the lawsuit. If you lose the case, his or her personal income will be protected from wage garnishment and other nasty post judgment collection actions. What a relief!
These protections extend past the marriage too. In the event you get divorced, any remaining pre-wedding debt would still be considered yours only. Not that it doesn’t get messy. If you and your spouse merged funds in a checking, savings, or investment account and a creditor wins a lawsuit against you, it’s possible that the money may be tapped for repayment.
And now for the warnings. When you enter into a legally binding relationship, your borrowing and repaying history impacts the other person. Here are four ways your past liabilities can hurt your future spouse.
1. As a couple, you have less income to work (and play) with. After forming a union you will share household costs. You may be trying to buy a house and need to save cash for the downpayment, or you’re just trying to make ends meet with regular expenses such as rent and utility bills. Whatever the case, when you are actively reducing your debts, a portion of your income is promised to creditors. That means you’ll have less money available for all the things you want and need to do as a couple.
2. Creditor calls come to your home. If you’re behind on you bills, the creditor might call you asking to be repaid. Same goes for a collection agency that bought the debt. It’s bad enough for you to pick up the phone when scary sounding people call and make demands, but quite another when your spouse is on the receiving end. Although the Fair Debt Collection Practices Act stipulates that a debt collector is not legally allowed to discuss the details of your situation with anyone but you (and your lawyer, should you have one) most people can detect the intention of a collection agent. Any communication with that person can be scary and awful.
3. Your credit rating may be shot, so your spouse may have to carry a loan. For credit score development, the two most important data points on a consumer credit report are payment history and the amount of debt you have relative to your credit limits. So if your credit reports are indicating evidence of late and missed payments, defaulted accounts, lawsuits, and bankruptcy, your scores are taking a major hit. Even if you’re on time with payments, maxing out your credit cards will also sink a score. What will that do to you and your spouse? If you want to take out a loan for a home or vehicle, insurance policies, or cell phone service together, your bad credit rating can result in terrible terms or outright rejection. Your spouse, then, may have to apply as an individual – and his or her income may not beet the qualification standards.
4. Depression and anxiety about debt can destroy a wonderful life. An overabundance of financial obligations can lead to a whole host of negative emotions. According to a study conducted at the University of Nottingham, there is a strong correlation between owing money and such emotional troubles as depression and anxiety. Is that any way to enter into a positive relationship? Not at all. When you’re feeling scared or terrible about yourself, your spouse doesn’t get the best you. If you love that person, this is the last thing you want.
The best thing you can do is pay off what you owe before you get married. If you can’t, though, be 100 percent honest. Explain what is going on with your money and credit, and what led to the debt. If it came from being irresponsible, cop to it. Total transparency is vital. Each of you should pull your consumer credit reports from annualcreditreport.com (they’re free once per year), and review them together.
In the event you can’t pay the bills off before saying “I do,” develop a feasible repayment plan, and share it with your partner.
After that, you’ll be ready to prepare for your future. It’s fine to keep your credit cards separate, but approach the management of them as a couple. If you find yourself sliding into debt once again, check in with your partner to mitigate the problem quickly. Remember, it affects both people in the relationship. If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) liabilities incurred during the course of a marriage are usually considered the responsibility of both people, no matter who ran it up. Even if you live in a state without these laws on the books, legal responsibility for individual debt can be shared in certain circumstances, such as charges you made for the children. For this reason it’s a wise to constantly evaluate your financial health. Make meeting about all things money and credit a regular habit – and prepare to lay all your cards on the table.