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Should You Pay Off Your Spouse’s Debt? Check These 8 Scenarios
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When you marry someone with debt, merging your finances can be difficult. Juggling a budget with another person means getting aligned on financial priorities and determining which debts you’d prefer to focus on, if any.
But if you’re unsure whether you should pay off your spouse’s debt, you’ll need to take into consideration factors such as how the debt affects you and your spouse, and if it’s important for it to be repaid.
Here’s a look at when a wife paying off a husband’s debt, or vice versa, may make sense — and when it may not:
4 times when you might help pay off your spouse’s debt
- A common financial goal is found
- The debt causes excessive stress
- Community property state laws apply
- You cosigned a loan
1. A common financial goal is found
Forty-five percent of recently married American adults did not discuss debt with their partner before getting engaged, a February 2019 LendingTree study on newlyweds’ finances found. However, talking about money can help you determine whether it’d make sense for you to make payments on your spouse’s debt — and it could even bring the two of you closer.
“Research shows that talking about money increases the intimacy in a relationship in areas outside money,” Tara Unverzagt, a certified financial therapist, told LendingTree. “It’s uncomfortable and maybe even embarrassing at first, but quickly people get over that.”
If you and your spouse share a financial goal like buying a home together, but their debt is affecting their ability to save money or stay afloat, then you may decide to tackle the debt together. For example, say you’ve earned a bonus at work, but don’t have a clear plan for the money. You may consider using it to help your spouse pay off a high-interest debt. Doing so would lighten their debt burden and save them money over interest. It could also free up cash for them to start focusing on another debt, contributing to a shared emergency fund or something else.
Furthermore, if you’ve married someone with bad credit, paying off their debt could improve their credit by reducing their debt-to-income ratio. This could later help the two of you qualify for a shared loan, like a mortgage.
2. The debt causes excessive stress
How each person in a couple deals with debt could also influence how you approach it. For example, if there’s a specific debt that’s causing your spouse major stress, it may make sense for you to help them pay it off. Relieving that stress could have an intangible, but positive, effect on their day-to-day life.
3. Community property state laws apply
If you live in a community property state, the government views all the debt accumulated while you’re married as a 50/50 split, no matter who’s responsible for it. Therefore, it would make sense to pay off your spouse’s debt, because it’s yours as well. If things go south for you two, you’d be responsible for your spouse’s debts if you divorce.
As of June 14, 2021, community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, as indicated on this map:
In addition, the IRS also notes that Alaska is an opt-in community property state, while Tennessee and South Dakota have also passed elective laws regarding community property.
4. You cosigned a loan
If you’re the cosigner on a loan for your spouse, your credit score will be hurt if your partner misses a payment. That’s because when you cosign for a loan, you’re signing on to be equally responsible for the debt. If they miss payments, the debtor could come after you for payments. The same situation applies if you and your spouse use a joint credit card.
4 times when you might not help pay off your spouse’s debt
- Your spouse is considering filing for bankruptcy
- You have an agreement to repay your own debts
- Financial independence is important
- There are limited emergency funds
1. Your spouse is considering filing for bankruptcy
If your spouse is filing for individual bankruptcy, it doesn’t make sense to pay off any debt in advance. As long as you don’t have co-owned debt, the filing won’t hurt your credit score. And if your spouse is filing for bankruptcy to get rid of debts, there may be no benefit to paying them down beforehand.
2. You have an agreement to repay your own debts
Perhaps you and your spouse have discussed your debts and decided on a plan to address them individually. In this case, you should stick to that strategy.
“I know one couple that the wife came into the marriage with some student loan debt and added to the total to get her Ph.D.,” Unverzagt said. “She came into the marriage and continued in the marriage saying, ‘This is my debt and I expect to pay it back.’ Her husband wanted to buy a fancy car and they agreed that was his debt to pay off. They have other debt that they jointly pay off.”
This couple had a solid deal in place that was comfortable and validated each other’s needs. If you can get there with your spouse, this can be a healthy way to deal with debts.
3. Financial independence is important
Maybe you really enjoy having separate bank accounts, or simply like the freedom that comes from having a set amount of money each month to spend or save as you please. If so, you can talk to your spouse about these preferences.
You should also discuss your financial habits to avoid having conflicts over differences in how you manage money. For example, if you enjoy a small splurge with each paycheck, such as getting a takeout meal or buying something for yourself, you should communicate that with your spouse. The less your spouse knows about your finances, the more room there is for misunderstandings and arguments.
If you’re forced to pay your spouse’s debt, things could get messy. You shouldn’t feel forced to repay debt, or be banned from managing your own money. If this happens, understand that it could be a sign of financial abuse. You may reach out for help from the National Network to End Domestic Violence if you are the victim of financial abuse.
4. There are limited emergency funds
If you and your spouse haven’t built an emergency fund — enough savings to cover three to six months of expenses — you might be hesitant to pay off your spouse’s debt. For example, you may each decide that one of you will focus on building savings while the other focuses on extraneous debt, such as from credit cards or personal loans.
The key, once again, is discussing a plan with your spouse and then sticking to it.