Here's What Happens to Your Loan Debt When You Get Married

The earlier you discuss finances with your partner, the better you can plan for a future together. 

Ah, marriage. That time in life when compromise becomes inevitable. Everything, from what you're having for dinner to whether $3,000 is too much to spend on a Super Bowl ticket, is up for discussion. Marriage unites every aspect of two lives, including your finances. So, what happens when one partner enters the marriage carrying a boatload of debt? 

Does your spouse's debt become yours? 

Let's say you've never been comfortable with debt. When buying a car, you buy a used one to pay it off quickly. When you use a credit card to cover an expense, you pay the card off in full before the end of the billing cycle, so you're not stuck with high-interest debt. In short, you've deliberately chosen to save and invest rather than borrow money to make purchases. 

Let's also assume that it's your partner carrying the aforementioned boatload of debt. The amount they owe on their credit cards alone is scary enough to make your hair stand on end. If the idea of becoming responsible for that debt is enough to make you break out in hives, we have good news for you. 

Any debt in your spouse's name alone is theirs and theirs alone. You don't take it on just because you're married and you are not responsible for paying it back. And getting married changes nothing for your spouse. They're still responsible for making payments. 

Takeaway: Marriage does not make you responsible for the debt in your spouse's name only. 

Your credit score

Any debt solely in your partner's name will not impact your credit score. Maybe your spouse is in over their head and skips a few monthly payments. Or they're making payments on time but maxed out on all available credit, and their credit score takes a hit. The good news is that their financial behavior does not bleed over into your credit report.

The bad news is even if your credit report remains pristine, your spouse's credit issues can bleed over into your life. Imagine that you both have great jobs, mortgage rates drop, and you decide it's time to buy your first home. You need to earn enough money to qualify for a loan on your own, or else the mortgage lender will look at both of your credit histories, including the existing debt your spouse brought into the marriage.

If you and your spouse take on any credit together, including an auto loan or joint credit card, your credit report names your spouse as your "financial associate." Once you are financial associates, creditors may want to pull both of your credit reports before finalizing a loan application.  

You receive an excellent offer for a fee-free credit card with a low introductory interest rate. You apply for the card, but the issuer runs a credit check on you and your spouse. Depending on your spouse's credit score, your application may be rejected, or the card company may offer you a card with a higher interest rate. 

You may face two issues if your spouse is knee-deep in old debt: Their credit score may be too low to qualify for new credit, or their debt-to-income (DTI) ratio may be too high for comfort, and credible lenders won't take a chance.

Takeaway: If you're entering a marriage with a debt-laden spouse, work together to devise a plan to get rid of the debt as quickly as possible.

Joint account exception

Any debt in both of your names belongs to each of you. If you jointly take out a loan for new furniture, a belated honeymoon, or any other purpose, you're both on the hook to pay it back. 

Takeaway: Only sign a joint loan application with someone after digging into their financial situation. Being too embarrassed to find out about their credit history may come back to bite you. 

Community property states

Your situation will be different if you live in one of these nine states. 

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

Like any other state, you're not responsible for a debt your spouse incurred before you were married. However, any obligation taken on by your spouse after the wedding is shared, even if you didn't sign on as a joint account holder, is partly your responsibility. 

If you're marrying someone who loves to spend, be aware that their new debt becomes your shared responsibility. If your spouse fails to make payments, a creditor can go after your joint assets to cover the debt. 

Takeaway: If you're concerned about marital debt stacking up, you can formally opt out of the community property system by having a written premarital agreement drawn up. 

Getting on the same page financially not only makes practical sense, but it may be one step toward making your life together more fun.