Before and during the course of a marriage, one or both spouses may acquire debt. While only one spouse's signature may be on a loan or credit agreement, both spouses may be ultimately liable for the debt. Circumstances such as divorce and bankruptcy may only complicate matters, and laws regarding co-responsibility for debt among spouses vary by state.
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Couples who enter into joint debt, agreements, in which the signature of both spouses is on a loan, payday advance, mortgage or credit card, must share in debt responsibility. If the couple divorces before repaying the balance, both spouses must pay back an equal share of the debt in the division of assets and liabilities. If one spouse cannot pay his share of the debt, the default will result in damage to the credit of both spouses.
If only one spouse enters into an agreement with a lender, and the couple resides in a non-community property state, the other spouse is not liable for the debt, and lenders cannot sue the other spouse for loan default. Alternatively, couples who reside in community property states --- including Texas, Arizona, California, Washington, Wisconsin, Idaho, Louisiana, Nevada and New Mexico --- may share joint responsibility in debts, regardless of whether the names of both spouses are on the loan or debt agreement. Laws vary from state to state, so consult with an attorney if you have questions regarding community property in your state.
A spouse who files for bankruptcy may or may not affect the credit and debt responsibilities of the remaining spouse. For Chapter 7 filers, a bankruptcy court discharges all debt responsibility of the filing spouse, often allowing creditors to seek payment from the other spouse if the couple resides in a community property state or has joint liability on the debt. However, couples who do not reside in a community property state may be able to protect the credit of a non-filing spouse if the non-filer's name is not on the discharged debts. On the other hand, a spouse who files for Chapter 13 reorganisation bankruptcy can repay debtors over a three to five year period, protecting the non-filing spouse from liability.
If you are having trouble paying your debts on time, try contacting your lenders and creditors to work out a repayment plan to help you avoid default or bankruptcy. You may be able to negotiate a lower interest rate or overall balance. If you own a home, you may be able to use the equity in a home equity loan to pay back your lenders at a lower, tax-deductible interest rate. You can also explore other options including third party debt negotiation, though the Federal Trade Commission warns that some third party negotiators operate as scams. The FTC says to cross-check a negotiation company with your state's Attorney General, the Better Business Bureau and your local consumer protection agency.
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