Premarital Debt Responsibility

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Latest post Wed, Mar 19 2008 2:45 PM by lostinparadise. 5 replies.
  • Tue, Mar 18 2008 12:26 PM

    Premarital Debt Responsibility

    To skip back story, you may scroll down to the numbered questions. My questions are concerning my husband's responsibility for credit card debt on an account I opened before our marriage. He has never been listed on the account. We live in California.

    First, some background information. I am 30 years old and, up until recently, had very good credit. I have had only one credit card for 12 years that I only used for emergencies and always paid the monthly payment on, often more than the minimum. I did have a couple other credit cards in that time that I had briefly, but paid off quickly and closed. I had always been frugal and had a nice chunk in savings. I paid cash for both cars I have ever owned, never wanting to be weighed down with debt. I was able to get away with only $3,500 in student loans because of grants and personal savings.

    Then, 2 years ago, I got married and had a baby. We had health insurance, but with the maternity, it was costing us over $700/month. Also, my husband had bought a home (in pricey San Diego) prior to us meeting. A commitment he could make easily before having a family to support, but with all the new expenses, we became a sinking ship. In no time at all, my $2,000 CC debt turned into $7,000, being used to pay bills (house tax, home insurance, etc.). My student loans fell by the wayside because we didn't have the money to pay all of our bills every month, and that one had the lowest interest rate. My husband had excellent credit as well, and only had one credit card with a low balance. Let it be known that we are both hard working people. My husband has put in 60+ hours a week for the last 3 years, but hasn't gotten the raises/bonuses that have been promised (a whole other can of worms).

    We live a very meager lifestyle. We share one car (a 2000 Chevy Tracker that my husband bought before we met - one of the cheapest cars on the road). We work less than a mile from home, so gas expense is very low. We don't have cell phones, big screen TVs, or any "toys" to speak of (just this 5 year old computer). All the clothes and shoes I own are at least 3 years old, minus some gifts. All the clothes and toys our daughter owns (which isn't much) have been given to us by family. We don't eat out, and have very rare "splurge" days. For a long time, we didn't even have meat in our diet because it was considered an expensive luxury. Even now, it's not regular. So, it's not a budgeting problem. The money just isn't there.

    Despite our hardship, we have continued to pay the minimum payment on my credit card. We are both responsible people and have always tried to be as financially responsible as we can. We just fell on a hard time and have been one step behind since then. We are always waiting for the next paycheck, and it always seems to come just one day too late. So, it was only a matter of time before the credit card bill was one day late. It happened last August. And BOOM! The $40 late fee. Then, the CC company decides to take a look at my credit report. They see the default on my school loans and... BOOM! Interest rate goes to 31%.

    My husband was in a 3 year fix rate on his home, that just expired. Our house payment is now all that we can afford. We can't sell now, because with the housing crisis we are upside down. It's so frustrating for us because we have very few bills and frills, and yet, we are drowning. We even had to drop health insurance to catch up a little. Luckily, my daughter can still get health care through a state program; although, we were just under the financial qualification, so if my husband gets any kind of bonus or raise, she will be ineligible.

    Bottom line, we can no longer afford the minimum payment on my credit card with the interest rate at 31%. The minimum payment this month is $275. I called to let them know my situation and asked for a reduction in the interest rate. They denied my request. I am scared because I know once we become delinquent, we will be be in a hole that we will not be able to recover from. If we miss one month, next month's minimum payment will be well over $600 and fees will stack up quickly. This is money we just don't have, and won't, for the foreseeable future. On a side note, I reviewed my statements from the last 12 years and realized I have paid them more than twice the amount that has been charged to the account.

    I have a few questions. If I am unable to keep up on these payments, I realize my credit will be affected and eventually the debt will go to collections. I am prepared for that, but know the money to pay will not magically appear when the creditors are calling for a lump sum. Hopefully I can negotiate a realistic payment plan, but I suspect by the time it goes to collections, the debt will have ballooned to $10,000 and I will be expected to pay minimum payments near what I can't afford now with the debt at $6,500.

    So my questions are...

    1. Is my husband responsible for the debt on the account that was opened 12 years ago and is solely in my name?

    2. If I am sued, could his wages be garnished or bank accounts solely in his name be affected?

    3. Can a lien be put on his house or car, which were bought before we met and are in his name?

    4. Can his property, such as an old computer, TV, etc., purchased before we were married be considered marital property and subject to lien?

    I don't have any assets to liquidate. Everything of value we owned was sold back when we were struggling just to eat. Naturally, I am just afraid they will go after the only two things we have left, which is my husband's house and car. But as I mentioned, he has no equity in his home anymore anyway and his car is years from being paid off.

    Thank you for any information you are able to provide.
  • Tue, Mar 18 2008 3:41 PM In reply to

    re: Premarital Debt Responsibility

    "Is my husband responsible for the debt on the account that was opened 12 years ago and is solely in my name?"

    I didn't read through the "back story" because it was WAY too long. If this is a credit card account and ALL of the charges were made before the marriage, then he should not have personal liability. However, a judgment against you can be enforced against your community property.

    "If I am sued, could his wages be garnished or bank accounts solely in his name be affected?"

    I don't believe his wages can be garnished, but an account solely in his name could be levied -- the presumption being that the money in the account is community property. If it's not, he would have the burden of making a claim of exemption and proving that fact.

    "Can a lien be put on his house or car, which were bought before we met and are in his name?"

    If payments were made on these assets during the marriage with community property funds, then you have a marital interest, and that interest is subject to a judgment lien.

    "Can his property, such as an old computer, TV, etc., purchased before we were married be considered marital property and subject to lien?"

    Lien? No. Levy? Possibly. VERY few (if any) consumer creditors are going to bother going after basic personal goods. However, if these things are located in your home, the creditor might presume them to be community property. In the HIGHLY unlikely event that a creditor tried to levy on these sorts of things, your husband would have to make a claim of exemption.
  • Tue, Mar 18 2008 4:10 PM In reply to

    re: Premarital Debt Responsibility

    Thank you for your reply.

    All but maybe $200 of the debt was incurred prior to the marriage. We were married less than a year ago and I haven't worked at all in that time due to pregnancy and a baby. He has an account solely in his name that I have never contributed money to. Does just being married make it community property funds and subject to levy?

    Also, the house in question is a loan co-signed with two other men (his friends) before the marriage. Is it less subject to a judgment lien since not only is my name not on the loan, but there are two other co-signers that have no association to my debt?
  • Wed, Mar 19 2008 2:01 PM In reply to

    re: Premarital Debt Responsibility

    "He has an account solely in his name that I have never contributed money to. Does just being married make it community property funds and subject to levy?"

    No. However, absent a prenuptial agreement, both spouses' earnings during the marriage are community property. If the money in his account came/comes from his earnings during the marriage, then it is community property.

    "Also, the house in question is a loan co-signed with two other men (his friends) before the marriage."

    I don't know what you mean when you say "the house...is a loan." In any case, it makes no difference who borrowed the money or who co-signed on the loan. The things that matter are (1) who is on title, (2) where the money came from to purchase the house and make the mortgage payments, and (3) how much equity there is. A fairly significant chunk of equity in one's personal residence is exempt, and it's VERY rare for a judgment debtor's personal residence to be sold as a result of a civil money judgment against the debtor.
  • Wed, Mar 19 2008 2:45 PM In reply to

    re: Premarital Debt Responsibility

    Thank you for your help. Sorry for the confusion. The two others that co-signed the loan each put a third down at purchase, and have made a third of the monthly mortgage payments. All three have their name on the title. There is no equity in the home anyways.
  • Sun, Mar 23 2008 10:01 PM In reply to

    • OhioCP
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    re: Premarital Debt Responsibility

    "We were married less than a year ago and I haven't worked at all in that time due to pregnancy and a baby"

    I'm not sure why you would have had to take off work the entire pregnancy, but that is all in hindsight anyway. The baby is here now, and perhaps to keep from completely drowning, it's time to consider getting back into the work force (perhaps on weekends or weeknights or whenever it is that dad is home to save on childcare costs), or perhaps you would consider providing childcare for another child in order to be able to stay home with your own. I've been in your situation where every penny counts (and young mouths to feed), and I know it's rough. I also am a firm believer that it's absolutely wonderful for both the parent and the child to be able to stay home with the child, however, this may be a luxury that your family simply can't afford right now. There are options, be creative and seek them out. Then you just have to decide which ones work best for you and your family. Best of luck to you! : )
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