Is My Spouse Liable for My Credit Card Debt?
- Review how spousal liability is different in community property states than in non-community property states.
- Liability rules vary from state to state.
- Don't assume your spouse has no liability for your debts.
Is my spouse responsible for my credit card debt? What happens to my spouse if I file for bankruptcy?
A debt collector is suing me for $5,700 in credit card debt. The credit card was in my name and the suit is also in my name only. Is my spouse responsible for my debt? If I get judgment against me and later file for bankruptcy will I still be liable for the debt?
If both spouses sign a debt agreement, both are liable to the creditor. However, if only one spouse signs agreement, then depending on which state the agreement was signed or where the spouses now live, the non-signing spouse may have liability.
| Community Property States |
|---|
| Alaska* |
| Arizona |
| California |
| Idaho |
| Louisiana |
| Nevada |
| New Mexico |
| Texas |
| Washington |
| Wisconsin |
| * Optional |
Source: Bills.com
Spousal Liability in Community Property States
If the spouses now live in a community property state, or lived in one at the time the consumer debt account (such as a credit card account) was opened, the non-signing spouse may have incurred liability without signing a credit contract as co-debtor. If the debt incurred during your marriage was used for the benefit of both members of the marriage, liability may accrue to the non-signing spouse in community property states.
Regarding a non-signing spouse's liability IF the parties are living in a community property state AND the debt was incurred during their marriage for the benefit of both spouses, AND a spouse is sued and a judgment is rendered for a specific amount owed, the judgment can be collected by wage garnishment against any defendant included in the judgment order singularly or simultaneously. The garnishment amount is normally 25% of net income (that is, after withholding) but this varies from state to state. The creditor does not have any duty to "even out" the judgment liability between the spouses. A creditor has the legal right to collect 100% from either spouse, whichever is more convenient for them.
As a practical matter, even in community property states, many creditors do not go to the trouble of suing both spouses, as doing so tends to complicate the legal process involved in obtaining a judgment. However, this does not mean that a particularly aggressive creditor will not pursue all of its available rights to collect a debt.
One important disclaimer: Community property laws are unique to each state -- no two states share the same laws. The discussion above regarding spousal liability is meant to provide general information about community property as a theory. Your state's laws may vary from the general theory. Therefore, it is important to consult with an attorney in your state who can review the details of your situation and give you accurate and precise advice about your rights and liabilities under your state's laws.
Spousal Liability in Non-Community Property States
If the spouses never resided in a community property state, and only one spouse signed the loan contract (such as a credit card agreement), then the signatory-spouse is liable for the debt. Conversely, the non-signatory spouse does not share in his or her spouse's liabilities in non-community property states.
Bankruptcy
Now let us turn to bankruptcy. Let us assume one spouse filed for protection under chapter 7 or 13 of the federal bankruptcy code. That filing may not have any effect, positive or negative, on the non-filing spouse. In a non-community property state, the filing of one spouse does not give the other spouse protection of the "automatic stay" (blocking creditors from collection) or the bankruptcy discharge.
Similarly, one spouse filing bankruptcy will not have an effect on the other spouse's credit report, if there are no joint debts. If there are joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non-filing spouse.
If both spouses are jointly liable to a creditor, the bankruptcy of one does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100 percent through the Chapter 13 plan, the co-debtor is protected by the co-debtor stay.
There may be good news for spouses who file for bankruptcy in a community property state. When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge.
Consult with an attorney to discuss the possible ramifications for both spouses. Bankruptcy laws and courts are federal, but community property and family law vary from state to state. It is important to discuss your situation with an attorney familiar with your state's marital property laws.
Bankruptcy and Judgments
Some judgments cannot be discharged in bankruptcy, including child support, repayment orders dealing with cases of fraud, student loans and some taxes. However, a credit card judgment can be discharged in bankruptcy.
Review the Bills.com bankruptcy help page to learn more about this procedure, what it can do for you, and more on which debts can't be discharged in a bankruptcy.
I hope this information helps you Find. Learn & Save.
Best,
Bill
10 Comments
The FDCPA is a key relevant law to analyze here. Under § 805 (a) of the FDCPA, "Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt..."
Under § 805 (d), "the term ‘consumer’ includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator."
This means a collection agent can always discuss a delinquent debt with a spouse, right? Wrong! The law is more complicated than that.
FDCPA § 803 (3) defines a consumer as the party responsible for the debt, and "any natural person obligated or allegedly obligated to pay any debt." For the purposes of the FDCPA, a consumer’s spouse may constitute a "consumer" if the spouse is legally obligated to pay the debt. Spousal liability varies according to state law, and on the type of debt.
If you live in a community property state, and the debt was incurred while married, then it is likely both spouses have liability for the debt. In this case, the FDCPA would allow a collection agent to discuss the debt with a spouse.
If you live in a common law state, then it is likely you do not have liability for your spouse’s debt. In this case, the FDCPA would not allow a collection agent to discuss the debt with a spouse.
Of course, if you are a co-owner of the account, such as a joint credit credit card, then you have liability regardless of which state you live in. A collection agent can discuss the debt with any co-owner of the account.
The analysis gets even more complicated if the debt is for a "necessity," such as medical debt. If you live in a state that follows the "doctrine of necessaries" and the debt was necessary for the support of a spouse, then the non-debtor spouse has liability for the debt. If you live in a doctrine of necessaries state, a collection agent can talk to a non-debtor spouse if the debt was a necessity, such as a medical debt.
Let’s talk about your situation. You mentioned you live in Florida. Florida abolished the doctrine of necessities. Florida is also a common law state. You mentioned the account is in your name only. Therefore, a collection agent violates the FDCPA when it discloses the debt to your spouse.
You mentioned Bank of America spoke to your husband. I will assume Bank or America is the original creditor, and is not a collection agent. The FDCPA's rules are different for original creditors. As written, the FDCPA does not apply to original creditors in most states, but a handful of states have written rules similar to the FDCPA that apply to original creditors. See the Bills.com resource Collection Laws & Exemptions by State to learn if your state has a law similar to the FDCPA.
Even if you do not live in a state with an FDCPA-like law, the Consumer Financial Protection Bureau (CFPB) indicated recently it plans to enforce the FDCPA equally to all who collect debt from consumers including original creditors.
Did Bank of America violate the FDCPA or Florida law when it discussed details of your separate account with your spouse? It may have. Consult with a lawyer who has FDCPA litigation experience. He or she will advise you of your rights, and will likely tell you you have a cause of action — a legal reason to file a lawsuit — against Bank of America. Were the caller a collection agent, you almost certainly would have a reason for a lawsuit.
In other words, go ahead and bank at the same bank or credit union, but open separate accounts. Feel free to buy a house, but title it in one spouse's name, and not both names. Any jointly titled accounts or property is vulnerable.
If you receive a notice of a lawsuit, consult with a lawyer immediately.
Your best course of action is to make an appointment for your spouse with a lawyer, who can draft a letter to the ex-husband explaining in greater detail what I just shared.
Also, Texas does not allow wage garnishment for credit card debt. Sure, they can seize your bank account, but you can simply have the employer give you an old fashioned check and cash it at their bank.
Focus on understanding the debt laws in your current state of residence, and not the state where you signed the contract with the credit card issuer. Colorado is not a community property state — it is a common law state when it comes to family law. Based on the facts you shared, I would guess your spouse has no liability for your debt. However, consult with a Colorado lawyer who has civil litigation, consumer law, or bankruptcy experience to learn more about your rights and liabilities.
My goal is to "take a hit" on my credit alone so we can pay off all these high interest cards and save up for a down payment for a house. Then, when it's time to apply for a home loan, my husband will do it based on his credit alone. Would debt settlement or even a debt consolidation affect his credit?Thanks!
Regarding your spouse's credit report, there is no such thing as a marital credit report or credit score. One spouse can have a 730+ score, and the other spouse can have a 500 score. One spouse entering a debt settlement program will not impact the other's score.