Dear Bankruptcy Adviser,
I met a man who is hugely in debt. He was trying to sell one home while buying another. Well, he did it at the wrong time and took equity out of one for the new home. The market crashed and now he owes more on each home than they're worth. He is thinking of letting one house go. Our problem is that we are thinking of getting married. How will his financial situation affect me as his wife? Will his possible short sale or bankruptcy ruin my credit and can creditors come after me?
I used to have a very short answer to this question, but there are many potential pitfalls. Maybe I am skeptical because I have been divorced and because I know that 50 percent of marriages end in divorce. But I would tell you to tread cautiously with your credit and his debt.
I have to be blunt: It is not worth risking your credit for him. He may react harshly to you if you do not help him. Tough. Tell him to grow up.
Be careful deciding how you share your good credit with his less-than-perfect credit. While his credit report or negative credit does not merge with your credit report when you get married, your opportunities as a household could be limited or eliminated.
Without knowing more specifics about your situation, I think you would want to hold off getting officially married until he resolves the property issue. While debt incurred prior to marriage does not become debt of the marriage, there are risks to the marital assets. Your wages and assets could be in jeopardy regardless of your legal liability.
Here are some financial matters to consider in your situation:
Co-signing for him on anything: Please don't, but I know you will. He needs your good credit to purchase things and will likely "guilt you" into helping him by co-signing a loan. I hope that does not work.
Home loans: When you complete credit applications in the future, your credit will help and his will hurt, especially for a home loan. Typically, you will need both incomes to qualify for a home loan. However, having negative credit will give the lender a reason to increase your rate. You might be able to apply by yourself and use his contributing income, but lenders will look for any excuse to charge a higher interest rate.
Car loans: Right now, most car lenders are desperate to get rid of inventory. You might be able to play hardball and demand a good rate because your credit score is good. Lenders will try to claim you are a higher risk because of his low credit, but I think it's just an attempt to get more money out of you.
Credit cards: I would avoid putting his name on any of your credit cards until you are certain that your new husband will not file for bankruptcy. Don't let him be an authorized user or co-signer. While making him an authorized user should have no impact on your credit if he were to file for bankruptcy, I don't think it is worth it.
Joint bank accounts: Don't do it yet. He could get sued and have his accounts levied. Don't put him on your accounts.
You might want to sit down with an accountant or family law attorney before commingling your accounts. Heck, it might be even worthwhile to meet with a bankruptcy attorney prior to getting married. Not very romantic, I know. But good credit is worth fighting to keep.
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