Did your husband rack up $21,000 in online gambling and put it on your Visa? Did your wife go on an online shipping spree with the joint credit card? What if either of these spouses used their own credit card instead? Are you liable?
The answer depends upon what sort of debt it is, whose name is on it, and how state law treats that debt. The law differs in community property states vs. common law states.
How Debt is Handled in Community Property States
There are nine (9) community property states - Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington, New Mexico, and Wisconsin. Alaska also has an opt-in. In community property states, anything purchased during the marriage is owned jointly, and any debt incurred during the marriage is owed jointly.
If your spouse ran up credit card debt or incurred medical debt during your marriage and you live in one of these states, you are responsible for half of the debt regardless of whether your name is on it.
How Debt is Handled in Common Law States
The remaining states are common law states. Under the common law, you are responsible only for debts in your name.
This might seem like good news, however, the lender has an argument that your name should be on that card and might be able to hold you liable for that debt if you:
- are an authorized user on the card,
- pay the credit card from your joint bank account, or
- you use the card for joint purchases or to fund joint expenses like a home renovation.
In common law states, joint debt is owed in its entirety by both and either party, which means if your spouse has no job and no assets the lender can sue you and collect the entire amount from you.
The bottom line is that in common law states it might be prudent to refrain from having joint accounts or credit cards.
Liability for Your Spouse's Credit Card Debt Incurred During the Marriage
What Happens When Your Spouse Uses His or Her Card
In a community property state, you are liable for half the debt. In a common-law state, if your name is not on the account, you are not liable for any of the debt.
What Happens When Your Spouse Uses a Joint Card
In a community property state, you are liable for half that debt. In a common-law state, you and your spouse are equally liable for the whole amount of the debt and the lender can sue and collect the entire amount from either or both of you.
What Happens When Your Spouse Uses Your Card
In a community property state, you are responsible for half that debt. In a common-law state, you are responsible for all of that debt unless you can show your spouse fraudulently used that card. If the lender sues you to collect that debt, you will have to join your spouse to that action as another defendant.
Liability for Your Spouse's Medical Debt Incurred During the Marriage
If your spouse incurs medical debt while you are married, in community property states you are responsible for half, regardless of whether your name is on the debt or not. In common law states, you are not responsible for any debt that is not in your name.
Liability for Your Spouse's Student Loan Debt
If your spouse took out loans before you were married, you are not liable.
If you co-signed any of your spouse's student loans, you are liable. If your spouse took out loans during the marriage and you live in a community property state, generally, you are not liable for federal student loans but you may be liable for private loans depending upon the law in your state.
Joint Assets May Be Levied or Subject to a Lien
Just because you might not be responsible for your spouse's debt, lenders can still hurt you by going after your jointly-owned assets to collect on the debt.
Commonly lenders will try to collect a debt through wage garnishments and bank account levies first. If unsuccessful, lenders can file a lien on your jointly-owned real property. When you refinance or sell the property, that lien must be paid. So regardless of liability, you might end up paying half of your spouse's debt after all.
About the Author
Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.