According to the American Academy of Matrimonial Lawyers, one of the top reasons marriages fail is money.
If you want to keep financial problems like debt from being a major issue in your own marriage, it’s vital to have a clear understanding of where you and your partner stand — and how you both think about money. Here’s what you need to know about marriage and debt before you tie the knot.
9 financial questions to consider before saying “I do”
As you consider your individual and joint financial circumstances, it’s important to understand how credit and debt can be affected by marriage to make decisions in a way that’s as informed as possible. Here are nine questions you and your partner should fully answer before moving forward.
1. How much debt do you and your partner have?
The very first thing you should do is get down to brass tacks. How much debt are each of you bringing to the table? No matter the amount, be honest about the amount of debt you’re facing — doing so can help you come up with a realistic plan to tackle it.
When my ex and I married, we both had student loans, and I had a small amount of credit card debt. We were honest about the amounts and the monthly payments. This helped us plan our spending more effectively and allowed us to understand where we stood as a couple.
2. What kind of debt do you have?
Don’t just talk about amounts you owe. If you plan to tackle your debt together as a team, you need to know what kind of debt each of you has. Couples who decide to share finances need to make a plan for how to pay off debt that incorporates the different types of debt in question. For example, we wanted to tackle my high-interest credit card debt before putting extra money toward either of our low-interest student loans.
3. Are you responsible for debt your partner incurred before marriage?
In most cases, you’re not responsible for the debt your partner had before you got married. While most of us don’t get married expecting to divorce, it’s a good idea to keep good records about the debt you both bring to the marriage. That way, in the event of a divorce, you know exactly what you’re likely to be responsible for.
The reality of the situation, though, is that even though you’re not legally responsible for your partner’s pre-marriage debt, it’s something that impacts you in your household budgeting decisions and how you decide to move forward.
4. What state do you live in?
Where you live makes a difference in marriage and debt. Many states follow common law property rules, which means that the debt each person racks up during the marriage is their own. There are some exceptions, such as in states where a divorce court might take into account whether one spouse took on debt for shared-household benefit.
In a community property state, though, debts acquired by one spouse may be owned equally by both partners — no matter who spent the money or took out the loan. If you live in one of these states, you might be responsible for debt your spouse takes on during your marriage, even if your name isn’t on the paperwork.
There are nine community property states:
- New Mexico
Alaska is a special case, where partners can decide whether or not to opt into community property status.
In some community property states, divorce judges take into account whether a partner used excessive debt for personal gain. Additionally, even in a community property state, it’s worth noting that debt acquired by your partner prior to the marriage probably isn’t your responsibility.
5. Should we pay off my partner’s old debt together?
Deciding whether to pay off your partner’s old debt together can be tricky. As a married couple, you probably have some shared expenses and goals. If your partner can’t contribute their part because of debt, it could slow your joint progress. Paying down the debt together as a household expense or goal can make sense, even if the debt remains in your spouse’s name.
But if your approach to finances is more separate, you might want your spouse to get out of debt using their personal income. However, this can lead to some feelings of resentment if your spouse feels like they are missing out or falling behind. There is also the risk that you could pay off the debt together and, once it’s gone, the marriage could end — and you’re out the money.
Carefully weigh the pros and cons, and make a decision that you and your spouse can both live with.
6. Should we refinance our debt together?
If you both enter the marriage with your own separate debt, you might be interested in consolidating all the debt together into one loan that you’re both cosigners on. This approach could potentially help you get a lower overall interest rate and simplify your joint debt repayment efforts.
The main thing to be aware of is that refinancing leads to a new loan that you’re both equally responsible for. If you refinance your partner’s debt or help them with a refinance by cosigning, that debt becomes officially yours — even if it was amassed before marriage. In the event of divorce, you could be held equally responsible for it.
7. Will my partner’s bad credit affect me?
Your credit scores remain separate after you marry, so your spouse’s poor credit won’t bring down your score. However, if you apply jointly for a loan, their bad credit can impact the terms of the loan. That’s why it can make sense to have the person with the best credit apply for a new loan.
8. Do you and your partner feel similarly about debt?
Sometimes, it’s not just about how much debt you have and the mechanics of paying it down. You also need to consider how you both feel about debt. One of you might be comfortable with taking out debt; you might not think twice about getting a five-year loan on a car and not paying it off early.
But what if the other partner is extremely debt-averse? Maybe they aren’t comfortable with any debt and insist on paying everything off quickly — even if it means short-term discomfort.
One person isn’t necessarily right or wrong. It’s a matter of compatibility and whether you have a joint approach that you’re both comfortable with. Honestly discuss your money mindsets, and if you disagree, see if there’s a middle ground you can both agree on.
9. What if we divorce later?
While you might not want to dwell on the idea of divorce, it’s always a possibility. Understanding the consequences of marriage and debt is important — no matter what happens.
How debt is divided up varies by case. No matter the state, divorce judges might take into account such items as which spouse makes more money, the reason the debt was amassed, and who uses an asset (like a car) secured by the debt.
Additionally, it’s important to note that, in a worst-case scenario, you could be responsible for your entire joint debt if your ex refuses to pay on joint accounts. Creditors don’t care about your divorce decree, so you could find yourself harassed if your ex doesn’t take care of their debts.
The hardest issue is whether you can trust each other. Even if a judge decides one thing, it’s possible that a creditor will come after you for a spouse’s debt, especially if you live in a community property state or are still listed on the loan account.
Your best-case scenario is to try to pay off as much debt as possible before the divorce, or use the sale of assets to pay off your joint debt so that both of you are as unencumbered as possible.
There’s no way to predict the future, and marriage and debt will always be an issue — even if the only debt you ever end up with is a mortgage. Being open in your communication, taking steps to build your own credit profiles, and keeping some of your debt separate could help protect each partner.