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Marriage debt refers to financial obligations made during a marriage, such as mortgages and credit cards. Because a marriage is a complex legal partnership, it is not as easy as looking at the name on a loan or account to determine who is responsible for marriage debt. So whether you enter a marriage, manage finances with a spouse or prepare for a divorce, it is important to know how marriage debt works. A financial adviser can offer valuable guidelines in dealing with shared debts, protecting your financial future and strategizing the debt division during a divorce procedure.
Marriage debt includes any financial obligations acquired during a marriage, regardless of whether the fault in the name of one spouse or both state. The most important factor in determining the marriage debt is whether the debt was collected during the marriage and was used for the benefit of the household or both partners. In general, marriage debt can include loans, credit card balance and other financial obligations that are used to support the lifestyle of the couple, to buy shared assets or to cover joint costs.
Marriage debt usually includes different types of obligations made during the life of a marriage. Here are eight to keep in mind:
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Mortgage loans: If a couple buys a house during the marriage, the mortgage is generally considered as marriage debt. Even if the name of one spouse is on the mortgage, both can still be responsible in a divorce. Courts often decide whether the house should be sold, refinanced or assigned to one spouse, where the other receives compensation for their share.
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Credit card debt: It can be difficult to determine who is responsible for credit card debt in a divorce. In general, household costs, vacations or shared purchases are considered marriage debt. However, if one spouse yields excessive debts on personal luxury without the knowledge of the other, courts can classify as a separate debt.
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Car loans: If a vehicle was purchased during the marriage, the corresponding loan is considered as marriage debt, even if only the name of one spouse is on the financing agreement. Courts can allocate responsibility for the car loan based on who the vehicle holds after the divorce.
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Medical debt: Many states consider medical costs that are incurred during a marriage as a joint debt, even if only one spouse has received treatment. If a few separates, courts can distribute medical debts on the basis of WHO treatment, financial circumstances and whether insurance has covered part of the costs.
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Personal loans and credit lines: Personal loans taken out during a marriage, such as those for home renovations, large purchases or debt consolidation, are often classified as a marriage debt. If a loan was used for household expenses or investments that benefited both spouses, it is usually divided into a divorce.
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Student loans: The treatment of student loans in a divorce varies. If the loans were taken out before marriage, they are usually considered as a separate debt. However, if a spouse has entered into student loans during the marriage and contributed to household costs, courts can classify the debt as partial or full marriage.
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Corporate debt: If a spouse starts a company during the marriage and brings loans or credit lines to finance it, the debt can be considered as a marriage, especially if joint assets were used to support the company. However, courts can look at a ownership structure, financial involvement and whether the company benefited the household in determining the debt department.
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Tax debt: If a few joint tax returns submit, both spouses may be just as responsible for each tax obligation, including unpaid taxes, fines or interest. In some cases, innocent spouse lighting may apply if one spouse was not aware of the financial misconduct of the other.
