You finally found the right person! You both love to do the same things, have the same dreams and have lots in common. You want to get married and share everything with each other…. Well maybe not everything. You just found out that your sweetie comes with something not so sweet: debt. Ugh. Combining living room furniture is one thing. Combining debts is a completely different matter. Now what do you do?
1. Know Who Holds Responsibility
First, it's important to know that you are not liable for your spouse's debt that was created prior to the marriage. This means that just because you marry into debt doesn't mean that you are now somehow automatically responsible for the other person's debt.
2. Fight the Urge to Merge That Debt
If you want to remain off the hook, do not, under any circumstances, take steps to combine that debt into joint debt. How would that happen? Say your spouse had pre-marital credit card debt and so did you. You then find out that if you transfer both balances to a new card, you can get a lower interest rate. So you apply jointly for the new card and transfer both of your previous card balances to the new card. Now you are both liable for the full amount, not just your portion.
3. Don't Get in Over Your Head
Be very careful and deliberate with purchases during the marriage. For example, only co-sign on a loan for your spouse if you are completely certain that either a) the spouse will be able to make the payments, or b) you are OK with making the payments if your spouse can't. Furthermore, you need to decide how joint loans will be taken out. If you buy a home together, consider whether or not you want to take out a mortgage in joint names. If you are the spouse with the better credit score, be careful about taking on more debt for the benefit of the other party. Only do so if you are comfortable with being on the hook for that debt even when the other spouse is driving the car or the boat or whatever the debt paid for.
4. Know Your State's Laws
Be aware of how your state handles debt incurred during the marriage by just one spouse. Most states will consider that debt to be marital regardless of whose name it is in. However, if the debt is incurred without the spouse knowing about it, and/or consenting to it, then a claim can be made by that spouse that the other spouse "wasted or dissipated" assets and thus that spouse should be made whole in some way. You will also want to decide if you want to add your spouse as a joint accountholder on a credit card or just simply an authorized user. The difference is that a joint accountholder is liable for what he or she charges. An authorized user leaves the original account holder fully responsible for the liabilities incurred.
5. Be Officially in Agreement
Consider executing a prenuptial or postnuptial agreement that specifically address debts and liabilities incurred before the marriage and those incurred during the marriage. Make sure the agreement also provides for who will be responsible for each type of debt if a dissolution of marriage occurs.
6. Plan to Pay Off That Debt
Be sure to come up with a plan for paying off your spouse's debt either prior to the marriage (ideally) or after the marriage (less ideal). Learning to plan together financially will be an essential skill for the marriage anyway.
As you're planning to join lives and finances, you may find difficult to sit down, go through statements and deal with the specifics, but you'll be glad you did in the long run. It's also good to go over both of your respective credit reports before you get married so you can identify any problem areas, and to help you include that in a plan for credit-building and getting out of debt. You can each pull your credit reports for free on AnnualCreditReport.com, and you can get monthly updates of your free credit report summary on Credit.com to watch for any changes.
The bottom line is that just because your spouse-to-be has debt doesn't mean you shouldn't get married. Careful planning and thoughtful decision-making can ensure that you, your new spouse and the debt can all live happily ever after.