Marital Debt Relief
Marital debt refers to expenses that are incurred during your marriage like credit cards, mortgages, car loans, medical bills, and more. It also includes property either of you purchased during the marriage, regardless of whose name is on the title.
When two people enter a marriage, expenses are naturally doubled. For instance, both of you might need a car to get to work. You will also encounter medical, social, and essential expenses like food, clothing, and often a bigger place to live. The good news is that if you are both working, you now have two salaries to work with.
To start off on the best foot, it is important to discuss finances before the big day. Explain to each other how you envision managing money as a newly married couple. What if one of you is frugal and the other is an impulse shopper? To avoid arguments, come up with a compromise that makes you both happy. If you can’t do it on your own, seek help from a financial expert.
Is it any surprise that money is the number one issue married couples fight about? If you aren’t on the same page, it can send you straight to divorce court. But if you follow a strategy and learn to compromise, both parties can meet in the middle and spend happily ever after.
Discussing finances probably isn’t your favorite topic. But no matter how uncomfortable it feels, being transparent is the only way to make the financial part of your marriage work. Secrets like a $10k balance on your credit card will only come back to haunt you—not due to the debt but because you withheld the information. Lying or keeping secrets about finances to your partner can set you up for failure in many different areas of your relationship. Finding a happy medium is the ultimate solution.
There are a few ways you can handle your money as a couple. Your options include separate accounts, a joint account, or a combination of the two. Check them out to see which strategies work best for you and your spouse.
Fact:
In a Fidelity study, more than half of married couples reported bringing debt into their relationships, and 4 in 10 respondents said it had a negative impact on their marriage.
Separate Accounts
Keeping separate accounts helps you remain in control of your spending. It might also feel more comfortable since you are already accustomed to managing your own finances. But it also takes more time and planning to determine who will take responsibility for each expense. If you go this route, you will still need to budget for shared household expenditures and discuss your long-term savings and retirement goals.
Some couples simply split the expenses down the middle, while others may be more comfortable paying a percentage based on their earnings. Having separate accounts provides the most autonomy if you are a take-charge person, but there are also some negatives to consider.
Pros
- More freedom to spend what you want
- You are not responsible for paying off your spouse’s pre-marital debts
- Splitting shared bills is the fairest method
- You can meet different savings goals
Cons
- Makes it harder to keep track of your money
- You double your risk of fraud
- Keeping track of who owes what is a lot of work, especially when children enter the mix
- You may not be optimizing your investments if you are both saving for retirement or goals based on your individual incomes.
What Impacted Your Marital Debt?
Responsible for sharing debt
46%
Living with only one income
59%
Legal expenses
8%
Higher costs of childcare
8%
Alimony
3%
Child support
6%
Joint Account
A joint account is a bank or brokerage account shared by you and your spouse. Each party is called an authorized user, which means you have equal access to the funds. Examples include checking and savings accounts, credit cards, and loans such as a home equity line of credit and mortgages.
Sharing a joint account provides the simplest way for two people to follow a budget and share financial goals. It is easy to track your spending all in one place and every purchase is transparent since you both have access to the account. If you and your partner aren’t on the same page about spending, this might not be your best option. All in all, this type of account is an effective way to combine and grow your money toward common goals.
Pros
- You save on financial charges, penalties, and fees
- It makes it easier to meet minimum balances at a bank
- No financial adjustments are needed as your family grows
- It is a fair way of sharing funds if one person is a stay-at-home parent
- You don’t have to spend time splitting resources
- It makes budgeting easier by offering a clear financial picture
- Writing checks for bills like rent and insurance is more straightforward
Cons
- You could be held liable for your partner’s financial mistakes, like an overdraft check or late fee
- It can lead to resentment if one partner is a much higher earner
- You can forget about keeping gifts for your partner a surprise
- You may feel guilty making certain purchases without first checking in with your other half
- You might resent using the account to pay off your partner’s pre-marital debt, including student loans and credit cards
- If you break up, a joint account is one more thing you will need to divide
- If your partner has a poor credit score, this can negatively impact your score
A Combination of Separate and Joint Accounts
Many couples consider a combination of separate and joint accounts as the best of both worlds. The idea behind this strategy is that both incomes go into a joint account where the two of you manage your savings, debt, and retirement together. Separately, each person controls their own private checking account which can promote a sense of financial independence. The money in the individual account can be used to save for a vacation, purchase a gift for your spouse or go for it and splurge a little on yourself.
The best part about having a separate account is that you will never need to justify your spending.
Pros
- It is easy to track your expenses
- You don’t have to deal with income inequality while paying the bills
- You each have the freedom to buy what you want using your private account
- You work together toward common goals and retirement
Cons.
- It requires opening and managing several bank accounts
- Having an amount deposited into your personal account every month may feel like an allowance
- If a creditor seized assets, everything in the joint bank account could be taken
- You track two accounts instead of just one
When it comes to money, you would be hard pressed to find many couples completely in synch. Typically, you will find one person is a conservative saver while the other is a high-risk spender. And both of you are convinced that the best way to spend money is your way. That’s why financial conversations normally don’t end well.
But you can change that by determining which financial arrangements work for both of you.
You don’t have to see eye to eye
And you probably never will. There is no right or wrong way to save and spend money. You grew up in different households with distinctive attitudes regarding finances, so it is only natural if you don’t share the same perspective. But it is important that you respect your spouse’s point of view and never judge. Otherwise, money can become a source of contention throughout your marriage. A worst-case scenario is divorce.
If the saver craves financial security while the spender doesn’t feel the need to save at the sacrifice of happiness, compromise is key. And it works. If you save a little and spend a little, it is a win-win. At the same time, establish goals you have in common and put money away for them, like retirement and raising children.
Keep An individual account
You might consider yourself half of a whole as a spouse, but you should always treasure the independent individual you were before marriage. You shouldn’t have to ask if you can purchase something unless it is expensive and might affect your budget. Having a separate bank account allows the independent you to have a little money to spend on whatever you want. It is also worthwhile to share a joint account to spend and save for regular household expenses and long-term goals.
Have your own credit card
By establishing and maintaining your own credit history, you can qualify for a loan in your name to borrow money. Keep at least one old credit card open after you walk down the aisle—especially if you plan on purchasing a home in your and your spouse’s name. Closing accounts can weigh heavily on your credit score and make it more challenging to obtain a mortgage. If you don’t plan on making a large purchase anytime soon, you should close all but one credit card in your name.
It is also important to keep some credit solely in your name to protect yourself from life’s surprises, like your spouse racking up debt. Even if you use a joint account for everything else, that individual credit card could save you a lot of money and aggravation. If you take your spouse’s surname, you will need to update your cards to match your new legal name.
Share the bills
If you are going to split the bills, having a strategy is key. Some couples pay household bills from their contributions in a joint account. Others divide the bills, with each partner paying his or her share from individual accounts. You can split the amount or assign specific bills. For instance, your spouse might pay the car insurance while you are responsible for covering the rent.
To keep the peace, fairly divide your expenses. If your spouse earns $100,000 a year and you bring in $50,000 yearly, divide your shared expenses proportionately. In this instance, you would pay half the amount your partner does.
Fact:
78% of couples who talk about money at least once a week report being very happy.
Talk it out
Just as it is important to check in with a financial expert at least once a year, you should have conversations with your spouse. You can’t create an entire plan in one sitting, especially as children and larger expenses enter the picture. Take the time to discuss financial topics like spending habits and express concerns about future priorities. If it is on your mind, you need to speak up. By being proactive, your financial situation and your marriage can thrive.
Almost 50% of marriages in the US end in divorce. Sad, but true. While no one wants to plan for the demise of their marriage, there are things you should know about combining your finances before saying “I do.”
Debts incurred before marriage remain the sole responsibility of the individual. So, if your spouse is still paying off student loans, you will never be responsible for paying them back. But if you sign up for a joint credit card before marriage, you are both responsible for the debt. Even if your spouse gets a bit carried away, it could potentially impact your credit score. That is why it is important to understand each other’s financial history before deciding if a joint account is a good idea.
Any debts incurred in both of your names during the marriage are considered marital debt. Some of the most common types include:
- Weddings
- Vacations
- Mortgages
- Auto loans
- Medical bills
- Student Loans
- Credit cards (single, joint, cosigned)
In addition, debt that benefited the family belongs to both of you, even if it was acquired without the other’s knowledge. For instance, money that pays for food, shelter, utilities, or the children’s needs is considered shared debt. Someone who purchased a car stereo with their credit card would be solely responsible for that expense. But costs for the children’s car seats would be shared.
Community Property Laws
It is pertinent to understand the marital laws where you live since each state sets its own rules. For instance, credit cards and other debts incurred during marriage in California is considered marital debt, even if the account is only in one name.
There are nine states that are known as community property law states. Both of you are responsible for new assets acquired during the marriage like a house and new debt like credit card balances.
The nine community property states are:
- Arizona
- New Mexico
- California
- Texas
- Idaho
- Washington
- Louisiana
- Wisconsin
- Nevada
Outside of these nine states, any assets or debts only belong to the individual responsible for them.
Fact:
Even in community property states, debts incurred before the marriage remain the sole responsibility of the individual. If your spouse is still paying off student loans, for example, you will never be the one who needs to pay them back.
You can expect your spending habits to change once you are on your own again. Below is information for situations you might run into as you reinvent yourself and your lifestyle.
- Proving marital debt
- Splitting marital debt
If you are trying to classify a debt as marital, the burden of proof falls to you. Even if the debt is in both your names, you must show it was used for joint benefit. Defining what the funds were used for will determine how the debt can be classified.
During divorce, assets are generally split equally. But who is responsible for the debt? In short, you both are since debts are divided in half. You usually have the freedom to wheel and deal on how everything is distributed if you don’t want to allocate everything 50/50. For example, your spouse might want to keep the house. To financially balance it out, they might also take on more of the debt.
Fact:
Divorce laws vary by state, so circumstances could impact how divorce debt is settled. Prenup agreements can also affect the settlement, which means one of you could leave the marriage with more debt than they started with.
- Debt from changes in household income
- Asset title changes after divorce
- Debt After Divorce
- Debt From Inconsistent Support Payments
- Setting Up a New Household After Divorce
- Setting Up a New Household After Divorce
- Debt from Legal Expenses
Divorce changes a two-income household to two single-income households. As a result, both people usually need to downsize to cover the bills. Even common living expenses could result in an accumulation of debt if you aren’t able to pay them on your own.
The division of assets can also influence your marital debt. If your spouse’s name is on a car you want to keep, the car loan might need to be refinanced to change title ownership. The financing rates could change if your credit score is lower than your partner’s. As a result, you could pay a higher interest rate and larger monthly payments than the original loan.
Once the divorce is finalized, you are now only responsible for your individual debt. But there is one huge exception. If your ex uses a joint credit card or takes out a loan in your name, you could still be held responsible for the payments. That is why closing any joint accounts should take top priority.
If you are the recipient of spousal or child support, inconsistent payments can cause a huge hassle. Creditors don’t care why your payment is late, all they care about is getting paid. If your ex is struggling to keep up with expenses and you don’t have enough income to temporarily cover the costs, you could be the one whose finances suffers.
Moving from one household to two can significantly increase your cost of living. If you move out of the family home, the rent or a new mortgage payment could quickly throw your budget out the window. And don’t forget the costs associated with furnishing the home and purchasing the basics like bedding, a new kitchen set and more. Even though the physical assets are divided, keep in mind that some money should be set aside to purchase household goods. And don’t forget those moving costs!
Moving from one household to two can significantly increase your cost of living. If you move out of the family home, the rent or a new mortgage payment could quickly throw your budget out the window. And don’t forget the costs associated with furnishing the home and purchasing the basics like bedding, a new kitchen set and more. Even though the physical assets are divided, keep in mind that some money should be set aside to purchase household goods. And don’t forget those moving costs!
If you own valuable assets or have children, working through the nitty gritty requires legal help. But with lawyers charging an hourly rate upwards of $300, divorce debt can easily add up. If you and your ex aren’t on the same page, you can expect to add thousands to the total of debt you will owe.
Fact:
In most cases, each spouse oversees paying their own legal fees.
When you are dealing with a considerable amount of money or assets, you might need outside help from a tax advisor, real estate appraiser, or child custody evaluator. The costs will add up even more if an uncooperative spouse takes you to court. Try to be as efficient as possible when splitting everything. Otherwise, you could end up spending your savings on legal fees and not have much left to start your new life.
Even if your spouse suffered with a chronic illness, there is no way to be emotionally prepared for their death. You should take all the time you need to grieve in your own way. But there are financial actions that will require your immediate attention, like contacting Social Security. The sooner you get your ducks in a row, the faster you can put all that the paperwork behind you and begin collecting the benefits you are legally entitled to receive.
You might have always handled your family’s finances in the past. But you may be overwhelmed by the number of financial matters you need to settle in the weeks or months following your spouse’s death. The best way to begin settling financial affairs is with the help of personal and professional advisors. They can walk you through the process and set your mind at ease during this difficult time.
If your spouse dies with an outstanding debt, you are not responsible for it—unless it is also yours. You are also not required to cover charges as an authorized user on your spouse’s credit card account. Instead, it can come from their estate. If there is no money or property left in the estate, the debt generally goes unpaid. For example, when state law requires the estate to pay survivors first, there may not be any money left over to cover debts.
If the debt is shared, you may be responsible if:
- You were a joint account owner
- You borrowed money as a co-signer on a loan
- You live in a community property state where spouses share responsibility for certain martial debts
- You live in a state with “necessaries statutes” where parents and spouses are responsible for certain costs such as healthcare
Fact:
Family members aren’t required to pay the debts of someone who died, according to both the Federal Trade Commission and the Consumer Financial Protection Bureau.
Checklist For What To Do When Someone Dies
Don’t be surprised if your thoughts go in a thousand different directions as you take in the loss of your spouse. This checklist will help ensure that you cover all the bases:
- Contact a funeral home to make arrangements
- Call your attorney
- Contact Social Security
- Locate your spouse’s will
- Notify your spouse’s employer
This could be the most difficult task you will need to tackle. It is recommended that you speak with your spouse ahead of time to share each other’s wishes. You can also pay for a funeral in advance and spare survivors the burden of arranging payment.
Each state has their own laws when someone passes. Your attorney can walk you through the process and provide advice as needed
You are entitled to Social Security survivor benefits if your partner dies. This could help you financially get through this difficult time. To report the death or apply for benefits, call 800-772-1213 or visit your local Social Security office.
If your spouse has a will, it is vital you know where to find it. This is a conversation that should be had the day each of your wills are finalized and stored away.
The human resources department is a vital source of information on beneficiary benefits, retirement, or pension plans. Find out what happens to medical coverage if you and your family are signed up under your spouse’s plan. If you do lose coverage, you can immediately sign up for them at work since the death of a spouse is considered a “life event.”
Fact:
Get at least 10 copies of a death certificate since it is probably the most important piece of paper you will need while settling your partner’s affairs.
- Check with the Veteran’s Administration
- Notify the insurance companies
- Change property titles
- Change titles on all joint bank, investment, and credit accounts
- Contact all three major credit bureaus
- Meet with your accountant/tax preparer
- Contact the financial aid office if you have a child in college
- Prepare a plan of action with a financial professional
If your spouse served in the military, call the Veteran’s Administration to inquire about benefits.
You are sure to have a lot of questions. Insurance companies provide online claim forms and instructions to take you through the process. If you are still unsure of something, give them a call.
It is important to update ownership documents and insurance policies—such as auto and homeowner’s— by removing your spouse’s name.
Close accounts that were solely in your spouse’s name or update the account holder information. You can usually find the required forms online.
Get copies of your spouse’s credit reports from Equifax, Experian, and TransUnion for information regarding all debts and any open accounts. The three major bureaus can place a notification in the credit report that says “Deceased—do not issue credit.” That way, no one can take out new credit in your spouse’s name.
Taxes for your spouse must be filed and paid for the year of death. If the tax preparation is complicated, a tax professional can walk you through the steps.
Many schools offer additional financial assistance for students who have lost a parent.
After the loss of a spouse, it is not uncommon for your financial situation to drastically change. You will need to revise your current plan based on new benefits coming in and minus your spouse’s past financial contributions.
If you are burdened with marital debt after divorce or the loss of your spouse, National Debt Relief can help you pay it off for less than you owe and in a shorter amount of time. We will support you every step of the way to help you achieve the fresh start you deserve.
During your free consultation, a debt specialist will determine a timeline and your monthly payment amount to settle your debts. You will immediately begin depositing that monthly payment into an FDIC-insured dedicated savings account in your name. Most clients become debt free in as little as 24-48 months.
Once a debt has been settled, we will contact you for approval and ask that you release the funds. If you lack the money to settle all your debts, we offer a payment program that enables you to make just one monthly payment to National Debt Relief. As the funds build up, we use the money to pay your creditors.
Tip:
Your success in the program depends on making on-time monthly payments.
National Debt Relief is accredited with an A+ rating by the Better Business Bureau and belongs to the American Association for Debt Resolution — the watchdog of the debt settlement business. To be a member of this council, we have pledged to treat our clients with transparency, honesty, ethics, and fairness.
To learn more about how National Debt Relief can help you take back your life, call 800-300-9550 or complete the no-obligation debt consultation form today. We promise to support you every step of the way, just like we have done for over 500,000 people across the country.
At the core of our client relationships is one simple factor: trust. We know that trusting anyone with your finances takes a leap of faith, and we live up to your expectations by providing our undivided attention. That way, we can better identify your goals and concerns before customizing an affordable plan that can save you the most money.
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- What is marital property?
- Does your spouse’s debt impact your credit score?
- What property can be divided in a divorce?
- What happens if the value of my pre-marital property goes up during my marriage?
- Can I use my spouse’s credit card after they die?
Marital property includes all property either spouse bought during the marriage, regardless of whose name is on the title. For example, if a couple purchased a home with only the husband’s name on the deed, the wife would still be entitled to some of the value of the home if they were to get a divorce.
There are two situations in which your spouse’s debt would impact your credit score. The first is if you signed up for a joint account. In this case, you knowingly signed on to take responsibility for any debt incurred from purchases made with the card. If you and your spouse pay your bills on time and keep your balances low, that credit card will positively impact both of your credit scores. But if either of you miss payments or run up a balance, both of your credit scores will take a hit. Your spouse’s debt can also impact your credit score if you were added as an authorized user to an account.
There are two different types of property for the purposes of a divorce. Property that the couple bought during the marriage is called “marital property”. Property that belonged to you before the marriage or was a gift to just you from someone other than your spouse is called “separate property”. Marital property can be divided between the two spouses while separate property is all yours.
If the value of your pre-marital property goes up due to positive changes in the market, the profit is considered yours. But if your property is worth more because your spouse helped improve it, the rise in value may be considered marital property.
No. You are not allowed to use your spouse’s credit card after they die unless you are a joint account holder on the card. If the card is in your spouse’s name alone, using the card is considered fraud—even if you are an authorized user.
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