Marriage may signal taking on someone’s last name, family, and even traditions. But are you signing up to be liable for your spouse’s debt too? And if your life partner is made redundant or fired, will you be responsible for your spouse’s debt?
This week Justmoney explores the responsibility of spousal debt and what you need to be aware of.
Tip: If you or your spouse is struggling with debt, consider debt consolidation and lower your instalments.
According to Preston Sheldon, head of legal and control for the Swartland municipality, liability for your partner’s debt is fully dependent on whether you are married in community of property.
Being married in community of property means you are legally classified under a joint estate. This means that everything you have now belongs to both of you.
“In marriage in community of property, both spouses share the risks and benefits of a joint estate in equal shares. This means whatever each of you bring into the marriage – a house, cars, furniture, debt, and investments – are owned as a joint unit. So, if either of you have debt, you are both responsible irrespective of who caused the liability or debt,” says Sheldon.
The separate estates belonging to the spouses become a joint estate the day they become legally married. This includes gifts, donations, inheritances, and remuneration.
“There are a few exceptions, where certain assets may not be included in the joint estate. For example, if a will stipulates that an inheritance should not form part of the joint estate, then that inheritance cannot become part of the joint estate. Those involved must ensure this is made known prior to the marriage,” says Sheldon.
But when it comes to debt, this means that even if you did not sign on the dotted line of the credit agreement, the creditor can pursue you for payment should your spouse not be able to afford the repayments.
However, the creditor can only demand payment from you if your spouse does not have enough money to pay the debt and you are financially able.
The creditor must first try to retrieve the money from the responsible party. If the creditor cannot collect from that person, the creditor may then move on to his or her spouse for payment.
While the spouse does not always have the chance to weigh in on any debt acquired before the marriage, when married, you certainly do.
“During the marriage, the consent from the other spouse is required in certain transactions in terms of Section 15 of the Matrimonial Property Act 88 of 1984,” says Sheldon.
“The act provides that a spouse in a marriage in community of property shall not bind himself or herself as surety, or enter into several other types of contracts, without the written consent of the other spouse,” explains Sheldon.
This may seem clean cut but there are other instances where things may become tricky. For example, if one spouse is sued for the maintenance pay of an extramarital child but is unable to pay due to being unemployed.
Sheldon explains that a joint estate can not be sued in a maintenance case. Instead, the responsible spouse should be held liable and should it proceed to go to court, the court will decide on the outcome based on financial viability and circumstance.
Independent financial advisor Lee Hursch says that the number of couples married in community of property have drastically decreased in the last couple of years. According to him, one of the reasons is financial preservation.
While most people marry for love and the belief that the marriage will last, you should also be realistic. You need to know what kind of marital contract you are entering and if it’s in community of property you need to be aware of the advantages and disadvantages.
“Debt should be a conversation that a couple has before marriage – especially how this will affect their finances,” says Momentum senior financial planner William Marra.
Financial stress can put a marriage under serious pressure. A clear understanding of your marital contract, combined with transparency between you and your partner about any debt and your financial habits, will alleviate this.
“Starting on a healthy financial footing is important when starting a marriage. The first step is being realistic about your debt as a couple, and your expectations and responsibilities,” says Sheldon.
Debt consolidation allows you to service all your debt by paying less. To find out more or to apply, click here.