Dear Debt Adviser,
First of all, I live in California, and I have been in a relationship with my boyfriend for quite some time, and we are planning to get married soon. He has a $100,000-plus school loan in his name, and I was wondering if I will be made accountable for paying off his loan with him as well?
The second question I have is that he claims that he will be able to get rid of that loan by declaring bankruptcy. Is that possible, and, if it is, will it affect me in any way if he declares bankruptcy before we get married?
You are smart to be asking these questions before saying, "I do." I detect a glimmer of concern that your intended may have some untidy financial habits. Picking up his socks is one thing; picking up his debts is something else altogether. To answer the first part of your question, no, you are not responsible for loans or debts that were incurred by your fiance before your marriage. However, you do become responsible for any new loans or debts that are accrued during the marriage. The reason for this is that California is a community property state. Assets and liabilities accumulated after the marriage are generally shared equally between spouses regardless of which spouse incurred them.
For my readers in others states who think they may be off the hook for their other half's financial missteps, be advised that California is not the only community property state. Others include Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, and the 51st state, Puerto Rico. Alaska has an opt-in community property law, meaning property is separate unless both parties agree to make it community property through a community property agreement or a community property trust.
A question I would encourage you to ask your future husband is how he plans to repay his $100,000-plus student loan debt. I'm afraid that filing for bankruptcy to dodge the debt may not work as well as he envisions. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 provides the same protections for privately funded school loans as those for guaranteed federal loans.
To have student loans discharged in a bankruptcy, your fiance would have to prove that payment of the loans would cause him "undue hardship." The courts do not consider very many things to cause "undue hardship." So, for example, unless your fiance can prove that he is physically unable to work now or in the foreseeable future, repayment of his student loans is definitely going to be part of his future and yours, if you decide to marry him.
What he needs, and I suggest you insist on, is a financial plan that includes aggressive student loan repayment. Your fiance should take the lead in fitting a repayment plan into your budget. The reality of the situation is that you will probably end up sharing some of the sacrifices that will likely be caused by having to use otherwise discretionary income for loan repayment.
I typically advise that couples keep some credit in their own names. I would encourage you to keep or establish credit in your own name even after you are married. Should your fiance decide to consolidate his student loans, do not sign on as a responsible party. And if his plan is to consolidate, have him do so before you are married. Otherwise, you may be saying, "I debt" when you say, "I do!"
In the second part of your question, you asked if his bankruptcy would affect you in any way. Remember that new debts incurred after your marriage takes place, even if your name is not on the loan and even if you didn't know about or benefit from the debt, could become your responsibility as well in a community property state. So while a premarital bankruptcy might not affect you financially, any new accumulation of debt or a second bankruptcy later would. I'm a bit concerned that a bright young man, as evidenced by his ability to get into an institution of higher learning that clearly charges a lot for its education, should so quickly try to ditch his obligations. Should he subsequently repeat this pattern and declare bankruptcy on any new loans acquired during your marriage, they could become your responsibility.
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