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Are you responsible for your spouse’s debt?

By Chesley Payne

A question that I often hear from clients is whether a person is liable for the debts of their spouse.

This issue often comes up during a divorce or situation in which a debt collector is contacting both spouses for repayment of a bill. The first question to ask is if the debt is a question a joint debt of both spouses. Did both husband and wife sign the agreement?

A common situation is a note to purchase a house. One spouse will often sign the promissory note and the mortgage and the other spouse will only sign the mortgage. Who pays? In this instance, the first spouse is both personally liable for the debt (meaning they can be sued in court) or the house can be foreclosed by the lender to recover the lender’s money.

The other spouse will have no personal obligation to pay the debt (meaning they cannot be sued in court), but the other spouse’s interest in the property will be subject to foreclosure in the event there is a failure to pay back the debt.

Even if one spouse does not sign an agreement, any jointly owned property could be subject to seizure or garnishment by the creditor in the event the creditor sues the debtor spouse and obtains a judgment. This could include automobiles, bank accounts or personal property owned jointly by the husband and wife. The easiest way to avoid these issues is to, obviously, pay the debt. However, if one spouse has a bad credit history or is subject to a judgment or garnishment, it would be wise for the spouse with a good credit history to hold onto those assets in their name.

If a judgment is obtained against one spouse, it’s most likely too late to transfer property out of that spouse’s name as a creditor could obtain court approval to set aside the transfer of the asset if it’s proven the transfer was intended to defeat the creditor’s attempt to collect on a debt. In all cases, contact your attorney immediately to discuss these issues.

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