Debt

[K9_Trainer]

I'm hoping somebody here knows this.

If you marry somebody who is in debt (lets say 20k or more), will their debt become yours? If they are ever unable to pay their bill, maybe because they can't find a job or lose their job, will the loan or credit card company be able to legally hold you responsible for paying it? I know they will harass whoever they can, but I'm wondering if you MUST pay your spouse's debt if they can't. Or what if your spouse dies? Are you legally obligated to assume payments?

 

[Luther073082]

I'm hoping somebody here knows this.

If you marry somebody who is in debt (lets say 20k or more), will their debt become yours? If they are ever unable to pay their bill, maybe because they can't find a job or lose their job, will the loan or credit card company be able to legally hold you responsible for paying it? I know they will harass whoever they can, but I'm wondering if you MUST pay your spouse's debt if they can't. Or what if your spouse dies? Are you legally obligated to assume payments?

Not really. . . here is how it will affect you.

If you marry someone who's in debt a lot and they can't pay their bill, their credit rating will go in the trash and they may be forced into bankruptcy.

That trashy credit rating will harm you as a couple if you try to take out a loan or a mortgage. Because with something like a loan or a mortgage they look at the couple's credit rating together and if one of them has a bad credit rating, it raises a red flag and they may reject you based on that. Although it may be possible you could attempt to get these things in your name entirely, that would also at the same time prevent you from submitting their income as part of your income.

And since morally speaking the money should be both of your money, then you will both have to work on paying the debt together.

Now if you divorce them, the debt shouldn't transfer and you shouldn't have to pay for it unless you re-finance.

It is worth noting that anything that is in their name alone they might be able to force a sale on in order to pay off as much of the debt if possible. Especially if the debt is unsecured.

Morally speaking I think you should look at their debt as your debt too. You combine a household you should combine money and look at the money as "our money". Therefore the debt is also "our debt". Things can change if they die or you divorce them, but this is certainly not something you want to plan for.

The main things I would be concerned about with the debt is the question of if it can be handled together and if the debt is an indicator of spending problems.

It depends quite a bit on what the debt is in too. I had quite a bit of debt when I got married. But it was all in student loan debts (still paying off those debts.) So it wasn't like I had a problem with going to the store with the credit card and raking up a bunch of debt that way. So I would certainly look at something like student loan debt different from credit card debt. Especially also since credit card debt has a massive interest rate while student loan debt interest is pretty low.

But when you are married and living as married you can't really separate yourself from the debt unless you intend to play some silly game where you each pay half of the living expenses and everyone has their own money and their own stuff. And at that point you are acting like roommates who have sex and not a married couple if you ask me. Because marriage is about a merging of two lives into one, not just living together.

 

[LinkH]

Aside from credit issues and bankruptcies, if you actually pay off the debt, it effects both spouses-- unless they really separate funds, and I kind of agree with Luther's thoughts on that. Unless one or both of you are wealthy, it's hard to separate funds completely. If both people are working, then usually both will contribute toward rent or housing, unless one person lives off the other's money. However it works, money that goes to debt could have gone to other things if the debt were not owed (or were not paid.)

I am pretty sure federal student loans in the US do not transfer and terminate at the death of the borrower. That's good in a way. It's like reverse life insurance. I wonder if any really old people decide to go to school before they die and live off student loan money to leave more to their kids. The studying part would be a real hassle though.

Ethics-wise, the lender does know full well that the possibility of certain borrowers' death should be calculated into the rates they offer. So it's kind of 'fair' in that sense to set up your estate to pay the loans off slow and focus on saving money for your family. If you die, the loans are gone and not a problem to your family. The downside of this, ethically, is that the loan is guaranteed by the government, which guarantees the loan so the lender can give a lower rate, and if you die without paying, society is stuck with the bill. So it's not a 'fair market'. It's a market imperfection created by the government.

 

[K9_Trainer]

Thank you both for your input, my questions have been very thoroughly answered! Much appreciated

 

[CounselorForChrist]

I would marry someone with a little bit of debt. But it depends on what kind and how they got it. Example after my dad has a really major surgery years ago the bills (even with insurance) were crazy. THen on top of it I was in and out of the hospital. So things got bad. We ended up in 22k of debt. After awhile my parents gave up and filed bankruptcy. So that kind of debt is not the persons fault.

Where as one woman I met online had around the same amount of debt. But she misspent her money. She treated her 5 credit cards like they were infinite sources of income. SO it all piled up and got out of control. She also had OCD and bought anything that was a "good deal". Even if she never needed it. On top of that she never ate at home. She was always eating out/ So in this case it was her fault for the debt and I wouldn't marry someone like that.

Being disabled debt worries me simply because I get SSI and no where near enough to pay off any debt I might incur. One big thing I remember was I was told DO NOT go in debt on a wedding. Do whats affordable. But in my wifes country weddings are a bit different. So we ended up putting out about $2000+. We are ok though since my parents helped. You don't want to start a marriage with major debt usually because it adds stress right away.

Everyone else covered all the other issues with it. As stated by one person the important thing to find out is why someone is in debt. Because it will mean future problems if they created their own debt out of poor spending.

 

[Neve]

Government student loans terminate at the death of the borrower. However, government student loans cannot be dissolved in bankruptcy; the government is more flexible in the repayment plan than private lenders.

I'm not sure about private student loans or credit card debt.

 

[LinkH]

Where as one woman I met online had around the same amount of debt. But she misspent her money. She treated her 5 credit cards like they were infinite sources of income. SO it all piled up and got out of control. She also had OCD and bought anything that was a "good deal". Even if she never needed it. On top of that she never ate at home. She was always eating out/ So in this case it was her fault for the debt and I wouldn't marry someone like that.

Yeah, someone looking to get married should avoid someone with those kind of problems until they get their habits under control.

My wife had a little debt, about $100 she'd borrowed from someone to start a business. That's a lot of money in her country. She told me about it when we were engaged, and I gave her money to pay it off.

Being disabled debt worries me simply because I get SSI and no where near enough to pay off any debt I might incur. One big thing I remember was I was told DO NOT go in debt on a wedding. Do whats affordable. But in my wifes country weddings are a bit different. So we ended up putting out about $2000+. We are ok though since my parents helped. You don't want to start a marriage with major debt usually because it adds stress right away.

$2k for a wedding in the US is cheap. I got married quite a while back in Indonesia. The currency had dropped to a fourth of what it was, and in dollars, prices were really cheap. Our wedding party cost about $2k. We fed a couple of hundred people in a hotel party room for that. They included a room for the night for the bride and groom.

 

[CounselorForChrist]

Yeah, someone looking to get married should avoid someone with those kind of problems until they get their habits under control.

My wife had a little debt, about $100 she'd borrowed from someone to start a business. That's a lot of money in her country. She told me about it when we were engaged, and I gave her money to pay it off.

I know in my wifes country theres no way to really rack up debt except through banks or borrowing from friends. So thats a good thing. Credit cards are the death of to many americans.

$2k for a wedding in the US is cheap. I got married quite a while back in Indonesia. The currency had dropped to a fourth of what it was, and in dollars, prices were really cheap. Our wedding party cost about $2k. We fed a couple of hundred people in a hotel party room for that. They included a room for the night for the bride and groom.

Well we paid over 2k. Thats not counting my wife and her family which spent about another 3k. If you heard what that paid for but what actually ended up happening you would be shocked. But I'd prefer not to mention it in a post everyone can see.

 

[Luther073082]

Thank you both for your input, my questions have been very thoroughly answered! Much appreciated

On the opposite side, though, my wife had no debt and no credit history.

So my good credit with having that debt allowed us to get a car loan at a low interest rate when one of our cars went kaput.

You can probably find credit with no credit history if you need it, but it will be at a much higher interest rate.

Now I wouldn't spend a bunch of money just to build a credit history. But there is value to having a credit history.

 

[K9_Trainer]

On the opposite side, though, my wife had no debt and no credit history.

So my good credit with having that debt allowed us to get a car loan at a low interest rate when one of our cars went kaput.

You can probably find credit with no credit history if you need it, but it will be at a much higher interest rate.

Now I wouldn't spend a bunch of money just to build a credit history. But there is value to having a credit history.

Yeah, I'm fortunate my parents got me a credit card when I was 17 and made me use it lol. I've got 6 years of at least SOME spotless credit history; not a single missed payment or late payment. I have no clue what my credit score is, but I recently got accepted for a Citi card with an interest rate of like, 9%, so I imagine it's not bad. It'll come in handy when I need a car loan.

 

[akmom]

I wonder if any really old people decide to go to school before they die and live off student loan money to leave more to their kids.

I'm pretty sure their student loan debts would be considered in the estate sale. So they really wouldn't be leaving anything to their kids unless they were making payments to them while they were still alive.

 

[K9_Trainer]

I know my biological father racked up a lot of debt on cards that also had my mom's name on them. I think a Chevron card was one. She divorced and overlooked these cards, and it wasn't until after they were divorced that my dad started to use them and not pay them. After he died, the company went after my mom and to this day she gets harassed (though not nearly as bad). I guess since they were used AFTER the divorce, she's not obligated to pay them? She's warned me that after she dies, they'll start harassing me to pay it since I'm next of kin.

 

[Luther073082]

I know my biological father racked up a lot of debt on cards that also had my mom's name on them. I think a Chevron card was one. She divorced and overlooked these cards, and it wasn't until after they were divorced that my dad started to use them and not pay them. After he died, the company went after my mom and to this day she gets harassed (though not nearly as bad). I guess since they were used AFTER the divorce, she's not obligated to pay them? She's warned me that after she dies, they'll start harassing me to pay it since I'm next of kin.

Problem was she had her name on those cards and never made sure to take her name off of them.

That would be like divorcing and leaving your ex spouses name still on the bank account that you use for your money.

You have to clear your name off of all shared financial instruments. And any debts created during the marriage (as opposed to before) should be split up by the courts. However you are unlikely to be saddled with any debt created before the marriage. Now if he dies and has secured debt from before the marriage such as a car loan or mortgage, you will likely have the choice to either start paying on that yourself or to surrender the asset.