Premarital debt weighs on new marriage

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
I had built up some credit card debt. I got married last year and now I don’t work or have any of my own money. All of the debt was from before I got married. I have not been making payments, and now I’m being sued by one of the credit card companies. I do have my name on a joint bank account now, but none of the money is technically mine. It’s income from my spouse. Can they go after that money, and should I take my name off the account? – Alice


Dear Alice,
If the credit card company sues you and tries to go after your joint checking account for repayment, and you can show that all the money is actually your husband’s, you should be able to protect those funds from being seized. However, defending yourself by having to prove that the funds are not yours is the hard way. If it were me, I’d take the easier way and remove my name from the joint account.

If you live in a community property state, the credit card company or collection agency could still try to sue your husband for the debt and then seize the money from his checking account. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an opt-in community property state. If the credit card company sues your husband, you and your husband must defend yourselves by showing that the debt was accumulated before your marriage.

Never ignore a lawsuit. By not showing up to court and representing your case, you let the creditor win a default judgment against you.

If you prevent the credit card companies from seizing your husband’s income by separating your financial accounts, you still have the problem of owing money you can’t pay back. Simply not paying a debt is almost never a good solution. Outstanding bills cause too much stress, and they can come back to haunt you years later. I’ve talked to people who feel as if there’s no point trying to make financial goals or reach them because this horrible debt is in the way. You must find a way to resolve your financial problems.

If you have ordinary credit card debt, your best bet is to try to find a way to earn money so you can pay back what you owe. You may need to go back to work, if possible, or sell a car or other asset. If you don’t have many expenses of your own, you should be able to commit most of your income to paying the balance down quickly. If you have debt on multiple cards, to minimize your interest expense, start by paying off the account with the highest interest rate, and work your way down to the accounts with the lowest rates.

Because this debt has already gone to court, if you decide to try to pay it, you should contact the creditor and ask if you can go back to making payments. Creditors just want to get paid, and if they realize that they can spend a lot of money suing you and probably get nothing, or they can work with you to let you pay it off, they’ll generally choose the latter.

Another option could be reaching an agreement with either the card issuer or collection agency (whoever is holding the debt now) to pay less than what you owe – otherwise known as debt settlement. Your credit scores will suffer, and you will most likely be responsible for paying tax on any forgiven amount, but that could be a money-saving solution.

If you have extraordinary debt, for example, if you had a major health crisis and couldn’t work, or if you had large debts from a business that failed, you may not see any way you can ever work your way out of that debt. Generally, if you owe more than you earn in a year or two when you are working, you’ll have a hard time paying it off. The older you are, and the higher your interest rates, the harder it will be to pull off. In that case, you may need to look at bankruptcy.

If you decide to file for bankruptcy, your husband does not need to file, too. Be sure to get good legal advice before you take as drastic a step as filing for bankruptcy.

If you would like someone to look at your total financial picture and help you decide what to do, please visit a credit counselor. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Financial Counseling Association of America.

See related: Do you have what it takes for DIY debt settlement?, 14 key factors when considering bankruptcy, What to expect if taken to court for debt

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Updated: 12-15-2017