11 Jul
The extent to which debt consolidation affects your spouse is dependent on how involved they are in your accounts and finances. Your debt consolidation can affect your spouse directly or indirectly, whether through their own finances, your joint assets or other avenues.
If you’re dealing with a significant amount of debt, consolidation is a way to regain control of your financial future. However, if concerns about your spouse’s finances are holding you back from taking action, you might benefit from a better understanding about how your debt consolidation impacts your spouse’s finances.
Joint accounts, cosigning and guaranteeing
As a general rule, your debt is your own, and your spouse is not responsible for paying it back, despite being married. As well, there are some circumstances in which their credit score will not be affected. However, there are exceptions. If your spouse has cosigned or guaranteed your debt – an agreement in which your spouse promises to pay any debt that you don’t – or if you share a joint credit card account, you’ll both be held responsible for paying back the debt. In the case of a joint credit card account, your spouse will still be held equally responsible even if the debt was built up without their permission or knowledge.
Credit score
Your spouse’s credit score might lower as a result of your debt consolidation. However, marriage does not tie together yours and your spouse’s credit score – these remain separate and any debt built on either will be the responsible of that individual, not the pair.
Indirect effects
It’s also important to keep in mind that there are certain tax responsibilities that result from consolidation. Any savings from a consolidated account is subject to income tax and, if you and your spouse jointly filed, you’ll both be paying more in taxes.
Another way debt can indirectly affect your spouse is if you both wish to later jointly sign for a loan or wish to have more credit. You could be facing higher fees or flat-out disapprovals.
Lastly, depending on the amount owed, joint assets could be seized in order to repay loans.
Understanding how debt consolidation will affect your spouse will help to smooth the transition. Debt consolidation can help you to get back on the right financial track, and you shouldn’t delay taking the right steps for fear of how it will affect your spouse’s finances. Speak with your spouse about how your debt consolidation could possible affect them, and why you’ve decided to take this step in debt repayment.