Debt in most new marriages means mine, yours and ours. With nearly 84 percent of people under 35 years old holding some sort of debt, according to the U.S. Census Bureau, this means most couples enter into matrimonial bliss with financial debt. Dealing with premarital debt means either taking on the debt of your partner or keeping it separate so your partner's past debt doesn't merge with your finances. Keeping things separate is not an easy job.
Credit reporting follows each person, not the married couple, and loans and credit taken under one name transfer only with the approval of the card or loan holder. Your home state determines if you can hold property as a married person under a "sole and separate property" classification. This legal statement requires the couple to state publicly that only one person owns the property and pays all costs from a separate personal account. Once married funds mix when paying from joint accounts for separate property, things get sticky and the debt becomes combined. To complicate things even more, if you move to a new state, the personal debt laws change with the move.
Adding your name to a spouse's premarital credit card account assumes the partner's debt. The card company won't agree to review charges to determine the different transaction dates to divide pre- and post-marriage debt. Adding your name to a car or home loan also transfers the responsibility to pay. If your spouse has court-ordered payments, such as child support or alimony, your joint bank accounts and the new spouse's cash in that account, can be attached for the payments.
Separate and Joint Assets
Anything owned jointly after you marry is up for grabs by a partner's creditors for debt created before the marriage. If you pay cash for a car with wedding cash, that auto can be legally taken by the court to recover debt from one spouse, if both names appear on the title. If you live in a state with community property laws, an attorney can protect separate assets from creditors attempting to attach your personal property. Even the most careful division of your personal goods might not work in some states where creditors must agree to recognize your separate stuff.
Prenuptial Agreements and Debt
One potential way to prevent premarital debt from mixing is to write a prenuptial agreement and file it so it has legal weight. A prenup is a combination of family and estate law, and your home state regulates what you can do under the agreement. Making a list of your valuables and sitting down with a legal professional gives you some piece of mind that your future spouse's creditors can't touch your stuff. If you're married and didn't do a prenup, it may not be too late. Some states allow couples to separate debt after the marriage -- sort of a re-do for couples not filing a prenup -- but not everyone recognizes this type of arrangement. This after-the-fact document won't stop all creditors from trying to help themselves to your personal and separate goods.
- CNN Money: Controlling Your Personal Debt
- United States Census Bureau: Flow of Funds Accounts -- Liabilities of Households and Nonprofit Organizations: 1990 to 2010
- Bankrate.com: Can You Divorce Your Spous'es Debt?
- County of Los Angeles Registrar-Recorder/County Clerk: Note of Exempt Transactions Under the Documentary Transfer Tax
- University of California Office of the Chief Financial Officer: Options for Holding Title to Real Estate in California
- USA Today: Prenuptial Agreements -- Unromantic, But Important
- Nolo.com: Debt and Marriage -- When Do I Owe My Spouse's Debts?
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