With This Debt, I Thee Wed

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My fiance has a large amount of debt. Once we're married, could his creditors come after my assets?

The good news: When one partner enters a marriage with a hearty helping of debt, the other isn't legally responsible for paying it off — even if he or she has the means to do so. Since the debt was acquired completely on his own, it "is entirely his and no one else is responsible," says Rudy Cavazos Jr., a finance expert with nonprofit debt-management counseling firm Money Management International. And as long as newlyweds don't merge their finances, this will continue to be the case. Should the marriage fail, however, the indebted spouse could walk away with a hunk of the spouse's assets (which creditors could then seek). The best way to prevent that from happening is, indeed, a prenup.

Divorce statistics aside, just how challenging it will be to marry someone with a lot of debt depends, in part, on whether the debt is in default. If that's the case — and the individual's credit rating is damaged — the couple's future purchasing power could be seriously affected, even once the debt has been paid off. This may also be the case for those marrying a foreigner with no credit history here in the United States. Purchasing something expensive, like a home, typically requires two borrowers, so when one applicant has a tarnished (or nonexistent) credit history, the potential for getting credit decreases significantly, says Sharon Patchett, president of the Consumer Credit Counseling Service of Central New York. In extreme cases, the couple might end up buying, say, a less-expensive home in one spouse's name only. He or she would then be solely responsible for mortgage payments — at least as far as the lender is concerned.

That might sound frustrating (after all, some folks have a lot of debt and a well-paying job), but keeping one's finances separate could be a prudent move for other reasons. That's because while a creditor can't go after assets held solely by the nondebtor, it's a whole different story for joint assets. The law varies from state to state, but creditors can generally seize joint assets to pay a premarriage debt. And even a prenup can't prevent that from happening, says Anita Ventrelli, co-chair of the Marital Property Committee of the American Bar Association.

But as mentioned earlier, while keeping one's assets separate will protect the nonindebted spouse in a marriage, that may not be the case if the marriage fails. While the laws, again, vary by state, assets that a spouse brought into the marriage could be lost in a divorce. For that reason, many experts recommend prenups for couples who enter a marriage with vastly different financial profiles. (Click here for more on prenups.) The couple can even include in the contract each spouse's share of assets acquired during the marriage. Then, if they get divorced, and if a creditor goes after, say, a house purchased together, the stake of the nonindebted spouse is protected.

Granted, some might say these precautions are severe. After all, even if these loans are in default, it may be too pricey for overseas creditors to chase the debtor to the U.S. But one certainly shouldn't bank on it. Steve Rhode, president of credit-counseling firm Myvesta, says he has seen more international collections in the past years as attorneys and collection agencies develop better international networks. "Because someone moves here from France doesn't mean he won't be pursued for back debt," he says. "The better thing is to make some arrangement to make repayments, rather than get married and hope it doesn't resurface." Should the debt be overwhelming, a couple should talk to a credit counselor.

Finally, it's worth mentioning that financial problems are one of the main causes of marital trouble. Olivia Mellan, author of "Money Harmony: Resolving Money Conflicts in Your Life and Relationships," has found that most couples have diametrically opposed spending habits, and it's not uncommon that one spouse enters the marriage with a mountain of debt. She offers one piece of advice: Share all your money secrets, but don't share the money.

For more this, see our previous Ask. And for an overview of the financial issues facing newlyweds, read our article "Marrying Your Financial Lives."

Originally published on January 24, 2003.