Dear Debt Adviser,
I am newly married but recently found out my wife has about $15,000 in prior credit card debt. It has been about three years since she defaulted and is in collections. My wife is in school working toward a degree, and she has not worked for two years. She will not be working for at least two more years due to school. She doesn’t even have a bank account or credit card now. We live in California. Am I liable for her debt being that we are in a community property state? I am not planning to have any joint accounts with her due to this matter. When filing taxes, does it matter how we file, married jointly or separate? Thank you very much.
Because the debt was incurred prior to your marriage, you are not legally responsible for your wife’s debt. In community property states, debts and income accrued after a marriage can be determined to be jointly held regardless of who did the earning or the spending. However, the earning and spending that happened before the marriage remains separate unless you commingle accounts after marriage.
Keeping separate accounts for now is probably a good idea. Later, after your wife finishes school and is working, you might consider opening a few joint credit accounts to help her re-establish her credit. But for now, I would recommend you keep your finances separate. If your income is being deposited in a joint checking account, I would recommend that you change that and have all income deposited into an account that is solely in your name. This will keep any collectors from garnishing your money in a joint account.
For income tax filing, from a debt and credit perspective, it may be fine to file jointly as you have deductions you would not qualify for if you filed as married filing separately. Federal and state tax refunds are not generally levied except for debts owed to the federal or state government or child support. To be on the safe side, I suggest you consult with a tax professional.
While you are being on the safe side, now is a really good time for your wife and you to get a copy of your credit reports and share them with each other. Ideally this is a premarriage activity. But in your case, since you have had one surprise, I encourage you both to come clean and bare your credit histories to each other.
Due to the fact your wife is not currently earning any income and you are asking whether you can be held liable, I am guessing that you and your wife have no immediate plans to pay her credit card debt. I want you both to remember that a routine part of the hiring process for new employees is a credit check. No employer likes to hire a person who may be distracted at work by collection calls, may not be a person who keeps his or her promises or is demonstrably irresponsible. All these things may be inferred by charged-off and unpaid debts. Coming to terms with her debts before she graduates may be an important factor in her finding the job she wants after graduation. Failing to do so may keep her unemployed or underemployed for longer than anyone wants.
One option for her to consider is to put college on hold (or switch to part time) and take a job that enables her to pay her debts off before she graduates. This will be good for everyone and would be a priceless lesson she won’t learn in school.
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