Spouses and Contractual Liabilities – a digestible overview
Spouses and Contractual Liabilities – a digestible overview – So you are young and newly married, and after getting a higher-paying job, your spouse applies for a few credit cards and gets approved for all of them. No big deal, right? Well, what if your spouse became overzealous and charged up so much debt that the bills became too much?
To make matters worse, your spouse didn’t tell you about the credit cards or the backlog of bills.
The Texas Family Code says you are not liable for those charges simply because you are married to that person. You see, while Texas is a community property state, there are misconceptions when it comes to community debts and liabilities.
Community debts are financial obligations incurred during the marriage, and should a marriage dissolve, the courts can divide that debt between the spouses. But community debt is not the same as joint liability to the party that the one, or both, spouses borrowed from. Community debt is debt that can be divided by the court regardless of who is legally obligated under the contract to the person who provided the value.
Confused yet? Let me back up a minute.
When we say contracts, we are talking about promises to pay (credit cards, promissory notes, and mortgages) another person for value received. Debt like this is common and incurred in a variety of ways for a multitude of reasons over the course of a marriage. A spouse becomes individually liable for a contractual obligation upon signing the contract – such as an application. If both spouses sign, they are both liable.
Here is where it gets tricky. If only one spouse signs, the other spouse can’t be held responsible UNLESS the signing spouse was acting as an agent for the non-signing spouse, or the contract was for necessaries.
Let’s look at a few examples:
- Both spouses sign a contract to buy a house. In this instance, both spouses are liable. If only one spouse signs, then that spouse is liable even if both spouses are on the deed to the house.
- One spouse individually applies for a new credit card. Only that spouse is held liable to repay that debt.
- With permission from the non-signing spouse, the signing spouse signs a check to pay expenses for non-signing spouse’s business. Both spouses are liable because non-signing spouse gave consent.
I also mentioned the term necessaries earlier in this blog. Necessaries vary depending on the circumstances of a particular case or where a couple is at in life, but are typically things like food, clothing and shelter. When one spouse applies for a credit card and uses it to purchase food or for necessary car repairs, the non-signing spouse is held liable if they didn’t previously state they were no longer financially supporting that spouse.
With all this being said, when you get married, you are obligated to help support your spouse. So even if the debt is not yours in a legal sense, it’s always good to work together to maintain a good financial history.
If you have any questions regarding the information in this blog, or if you have a specific case that needs to be reviewed, please contact one of our knowledgeable team members at Nelson Law Group, PC.