You've met the love of your life, and the two of you are planning to get married. There's just one problem: Your beloved has a ton of debt.
Be happy to at least know this. Too many people get married without realizing how bad their partner's financial circumstances are before they merge their financial lives.
People can have significant debt for a lot of reasons. Some have student loan debt. Others simply are poor money managers and get in over their heads. It's important to know which it is.
Start with a Prenup
How do you protect yourself from being held responsible for this debt and for it impacting your credit score, whether you remain married or eventually divorce? Certainly, a prenuptial agreement is a good starting point. Prenups aren't just meant to protect assets. They can also be used to protect people from their spouse's debts.
The prenup should clearly outline how much debt each of you is bringing into the marriage. It should also address how debts will be divided in a divorce.
Avoid Merging Your Debt
After the prenup is signed, however, it's essential not to merge your debt with your spouse's unless you're prepared to take full responsibility for it. As long as you keep the debt separate, you won't be responsible for what your spouse owed going into the marriage.
You may be tempted, for example, to combine both of your credit card debts into a new low-interest card. Once you do that, however, you're both responsible for it. Further, if you take out a loan together, or even if you co-sign on a loan to help out your spouse with a poor credit score, you could be stuck making the full payments if he or she is unable to.
Of course, when it comes time to buy a home, a mortgage is something that most couples get together. You should be confident that your spouse is able to hold up his or her end of the bargain, whether you remain married or not.
Put Your Financial Cards on the Table
One of the advantages of getting a prenup is that it requires couples to be honest about their individual financial situations as well as their attitudes about money and their financial goals. Exchanging credit reports, bank statements and other documentation can help keep everyone honest. This may also be a good time for the spouse with significant debt to put a plan in place for paying it off.
Each person should have his or her own attorney when drafting a prenup, or at the very least have your own attorney review it if your fiance's lawyer drew it up. This can help ensure that your interests are protected.
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