Wife Pays Spouse’s Debt, But Should She Be Responsible?

Posted on December 12, 2020 in Debt

Debt can be stressful. It seems so easy to accumulate and yet so difficult to pay down and work your way towards becoming debt-free. 

The only thing worse than paying for the debt you have accumulated over the years is being responsible for the debt your significant other has racked up.

Should you even be responsible? 

When Did the Spouse Receive the Debt?

One of the biggest factors in most states is when the debt accumulated. In most cases, debt gathered prior to a marriage would remain with that singular person and they would remain solely responsible for repaying. 

Debts incurred during marriage can either be individual debt, or shared debt depending on a few variables.  

Where Do You Live? 

For those living in one of the nine community property states, you may be surprised what you become responsible for within your marriage. 

Community Property States 

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

In these states, property and debt acquired during marriage are automatically split 50/50. This means if you were to pay for a house solely out of your pocket, you would still only own half. During a divorce, the other party would be able to collect half the value or cause a force of sale and receive half the sale.

Even if a state isn’t considered a community property state, they may still lean more towards the practices of dividing property during a divorce. Most often referred to as common law states, these states take purchasing action and item utilization into account to better understand how items should be divided.

Community Debts 

While not technically a joint debt, community debt refers to a credit developed on joint items such as healthcare, food, or other bills. These different aspects are said to be for both parties, and while a card may only be in one person’s name, the debt is really on the behalf of both of them.

This means that if a husband was to have a credit card prior to marriage, the debt would be his responsibility, but once married if they used that credit card to pay for utilities or other needed items, the debt accumulated while together would be the responsibility of both parties. 

Joint Debts 

When taking out a large loan, such as a mortgage, you often benefit from taking out a joint loan or having a co-signer. These joint debts are considered the responsibility of both parties equally, regardless of who uses the items. 

Some loans can be reduced to a sole owner, but oftentimes requires the contract being re-written since being joint was an original term within the purchasing agreement.

Should the Spouse Pay?

Ultimately this is a question best answered between the two parties, and is widely focused on the beliefs or opinions of the couple. Some people believe that all debts are joined once married, while others believe in a split between personal and joint finances. 

At the end of the day, there is the legality stating that debts prior to a relationship are the responsibility of the individual, but this is not the only factor determining if someone should do something. 

While in a relationship, it’s important to be open about your financial status, since ultimately your actions have effects on someone else’s life. Part of being open about your finances is making a plan together. 

Taking Care of Debt 

Taking hold of your debt situation can be stressful, but extremely important for your future success. When large amounts of debt are accumulated, you begin paying hundreds to thousands of dollars every month on interest. This means you’re giving your hard-earned paycheck to the bank and other lenders, and really getting nothing in return. 

It’s time to reduce your debt, and save yourself from the extreme costs of interest, so you don’t have to worry about your spouse having to pay for your debt. 

Budget  

The first step to understanding your financial status and making a plan is understanding your current budget. This takes account of all incomes and expenses being made at any given time. 

Your budget is about more than just how much you pay per year, or per month. It’s important to break your budget into your pay periods. This will give you an idea of when you will have extra money, or when you’ll be more on the edge. 

You should also organize your debts into time, and categories such as your long term installment loans, recurring debts (credit cards), subscriptions, short term debts, utilities and other costs. This will give you an idea of the benefits of removing some debts, such as high interest credit cards or personal loans that may not be benefiting your credit score, or worse, lowering it. 

You should put focus into your subscriptions list and determine if each one is even used, and if it matches your customer value. Customer value refers to how much you feel an item or service is worth. For example, your TV streaming may not be worth $150 a month in your opinion, and now is the time to evaluate and determine if you want to even continue the service. 

This same mindset should be used when looking at all expenses within your budget. Does the cost meet your expectations? 

Working Towards A Good Credit Score

While a credit score can be overwhelming, you should be working towards improving it. When looking to make a future long term investment, such as a home, the annual percentage rating determined by your lender will greatly impact your actual paid value of your home. 

Large purchases such as these cause you to pay tens of thousands of dollars towards the bank, simply because you didn’t plan early on to improve your credit score as much as you could first. 

Focus on lowering your recurring debts, such as credit cards and lines of credit. These are a  focused visual representation to the bank on how you borrow and repay money. If you’re constantly racking up debt, this can also be a red flag showing that you’re not in a financially stable part of your life. 

It’s important to keep your credit utilization, or your used available recurring debts below 30%. While you want your credit utilization low, you also don’t necessarily want 0% or no credit cards or loans at all, since this eliminates the lender’s ability to see that you use credit efficiently. 

You also don’t want to ask for large loans too often. It’s important to do research, but asking frequently raises a red flag that you’re in need or want of funds outside of your income’s abilities. Known as hard inquiries, these occur when a lending company runs your credit report. Next time you decide to request a loan for a new vehicle, consider doing more research and less price matching. 

Be Honest About Your Finances

Being in debt can be a bit embarrassing, and something you may not be proud to share with your significant other. Ultimately, your debt will have some sort of an impact on the people you decide to share your life with, taking from your paycheck. 

Imagine this, your boss comes in and tells you that you’ll be taking a $3.00 an hour income cut. You’d be furious. How dare he take your money just because he can.

The average consumer will pay over $280,000 in interest alone in their lifetime. With the average human working around 90,000 hours within their lives, this is equivalent to a loss of $3.11 per hour. 

By taking control of your debt and finances, you can work towards lower APR with each loan, or even begin building savings where items could be paid either fully with cash, or at least a large portion causing your lended amount to be reduced. 

While debt can be stressful, it’s important to have a conversation with your significant other about your current financial status, and make a plan to work towards financial security. 

Create A Lifestyle Within Budget 

With your budget in hand, it’s important to plan and create a lifestyle that fits within your means. You should consider following the rule of 50/20/30. This places 50% of your income towards essentials such as your house, car, and utilities, 20% of your income on debt repayment and savings, and 30% of your income for your wants or places where you deem necessary. 

Creating a lifestyle often involves self improvement, and searching for opportunities within your career. You should always be looking to take your career to the next level, with promotions and lateral movements within your current employment. 

For some people, a large step towards a lifestyle change may mean looking for employment elsewhere. If you aren’t happy with your workplace or pay, consider actively looking for other opportunities and always improving your resume. 

The Takeaway: In community property states, a wife will legally take on her spouse’s debt whether she wants to be responsible or not. Outside of that, the debt really isn’t hers to pay, but she may choose to help if her partner is in need.

While legally, the spouse may or may not be responsible for paying the debt, it’s important to remember you have decided to take on life as a team. Being honest about your financial status and goals will allow you to accurately budget and plan. 

Gaining a deeper understanding of your finances through Turbo Finance will allow you to take control of your current and future finances.

Sources 

https://www.investopedia.com/personal-finance/which-states-are-community-property-states/

https://www.marketwatch.com/story/the-average-american-pays-280000-in-interest-2015-01-14#:~:text=Referenced%20Symbols&text=The%20average%20American%20consumer%20will,credit%20scores%20and%20mortgage%20size.

https://www.gettysburg.edu/news/stories?id=79db7b34-630c-4f49-ad32-4ab9ea48e72b&pageTitle=1%2F3+of+your+life+is+spent+at+work#:~:text=Writer%20Annie%20Dillard%20famously%20said,at%20work%20over%20a%20lifetime.

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