More often than not, what your spouse owns, you own too, and vice versa. What about the money you owe? What if you have debt that your spouse wasn’t aware of before? It can be stressful, especially when debt collectors start calling you and threatening you with wage garnishment.
Can my spouse be garnished for my debt? Yes and no. It depends on the state where you live, the kind of debt that is involved, and how much you earn.
Can creditors garnish your spouse’s wage for your debt? Depending on where you’re located, three things can happen when creditors try to garnish your spouse’s wage.
- Joint accounts may be garnished even if your spouse doesn’t owe the debt.
- Your spouse’s account may be garnished, whether or not it’s a joint or separate account.
- Creditors may not be allowed to garnish your spouse’s wages.
Creditors may or may not garnish your spouse’s account depending on your state laws, how you and your spouse legally share properties, and what your debt obligations in your state are.
Creditors can also proceed with garnishing wages after getting a court judgment. It means they have to sue you or your spouse first. They have to either win the case or get a default judgment (if you fail to respond to the lawsuit). Once a money judgment is obtained, creditors must get a court order that will mandate employers to take out a percentage of your or your spouse’s wage to satisfy a debt.
Community Property State
How can a judgment against me affect my spouse? If you live in one of the “community property” states (listed below), your spouse will also be liable for repaying the debt you’ve made since you’ve been married. It means their wage can be garnished, provided that the debt collector managed to get a court judgment.
In a state that observes community property law, you and your spouse share almost all properties and debts incurred during your marriage. It doesn’t matter if the property is titled jointly or separately, it belongs to both of you if you acquired it during your marriage. However, this doesn’t apply to property given to you as a gift or inheritance.
Under the community property state, creditors can:
- Garnish you and your spouse’s joint accounts
- Garnish your spouse’s separate account for your debt if the creditor obtained a court judgment
Always remember the keyword here is “during” the marriage. Therefore, any existing debt you took out when you were single, such as student loans, will not become a joint debt after you got married.
The community property states in the US are:
- Arizona
- Idaho
- California
- Nevada
- New Mexico
- Louisiana
- Texas
- Wisconsin
- Washington
In Alaska, spouses can opt in to make their assets and debts community property.
Common-Law State
On the other hand, if you live in a “common-law” state (e.g., Iowa, Colorado, Kansas, and Montana), you’ll be solely responsible for the debt you incur on your own. Your spouse will not be liable for repaying the individual debt.
But there are exceptions in states that follow the “common-law” rule. These are the following:
- You and your spouse are responsible for the debt that benefits you as a couple and your family (doctrine of necessaries). Examples are food, clothing, shelter, childcare, and medical expenses.
- Your spouse will be liable for a debt if you both applied for the loan under a joint account.
- Your spouse will be liable for a debt if they co-signed for a loan, even if it isn’t a joint account.
Can You Remove Your Spouse’s Liability for Your Debt?
Yes. If you live in a community property state, there’s a way to remove your spouse’s liability. You and your spouse can sign a prenuptial or postnuptial agreement to have your loans and income treated separately. You may also sign an agreement with a creditor stating that the latter will only go after you and your personal property for any unpaid debt.
How Can a Creditor Garnish Your Spouse’s Wage?
For most types of debts, creditors cannot immediately garnish your spouse’s wages. First, they need to file a lawsuit, get a judgment, and a court order.
If a creditor gets a court order to garnish your spouse’s wage, there are some restrictions they need to follow.
- The maximum amount that can be taken is 25% of your spouse’s disposable earnings
- The amount of your spouse’s disposable earnings that are over 30 times the federal minimum wage
Tenancy by the Entireties States
Creditors cannot garnish joint or separate accounts in states that recognize tenancy by the entireties unless a judgment is obtained against you and your spouse.
Under tenancy by the entireties, each spouse has complete rights to each other’s property. So, if you have a joint account with someone who’s not your legal spouse, creditors may garnish that account for your debt.
States that recognize tenancy by the entireties on all types of properties are:
| States that recognize tenancy by the entireties on all types of properties are: |
|---|
| Arkansas |
| Delaware |
| Florida |
| Hawaii |
| Maryland |
| Massachusetts |
| Mississippi |
| Missouri |
| New Jersey |
| Oklahoma |
| Pennsylvania |
| Rhode Island |
| Tennessee |
| Vermont |
| Virginia |
| Wyoming |
| States that limit tenancies by the entirety to real estate only are: |
|---|
| Alaska |
| Illinois |
| Indiana |
| Kentucky |
| Michigan |
| New York |
| North Carolina |
| Oregon |
Can You Use Exemptions to Protect Funds in Your Joint Accounts?
Whether you live in a state that follows community property law or common law, there are instances when creditors cannot garnish you and your spouse’s joint account. In most types of debt, the exemptions include the following:
- Social security
- Disability benefits
- Retirement income
- Child support
- Alimony
Will Your Spouse be Responsible for Your Tax Debt?
Your spouse is not liable for the tax debts you incurred before you were married. Only you will be liable to pay that debt.
If you and your spouse filed jointly on the year you incurred your back taxes, your spouse’s liability will be determined by the following:
- If your spouse knows about the issues that resulted in the tax debt
- If you and your spouse still live together
- If your spouse has benefitted from your fraudulent tax return
- If your spouse had no clue that you filed your tax returns incorrectly, your spouse may qualify for Innocent Spouse Relief (more on that below)
- Your spouse needs to prove that they didn’t know anything about the situation that led to the back taxes
- Your spouse must prove that they didn’t benefit from the refund you received as a result of the understated taxes
If your spouse meets the last two conditions listed above, they may apply for the Innocent Spouse relief. If approved, your spouse will enjoy full tax debt relief.
What can your spouse do if you’re still married but you no longer live with your spouse or you're heading for divorce, and you made a joint filing? Your spouse may apply for Separation of Liability Relief. It’s a request to assume partial liability if you are already divorced, legally separated, or have not lived together for at least 12 months before the filing was made.
What is an Innocent Spouse Relief?
According to the IRS, innocent spouse relief offers tax debt relief to individuals whose spouses or former spouses fraudulently reported or claimed credits or deductions, or didn’t report income at all.
You can file for an Innocent Spouse Relief no later than 2 years after the date when the IRS tried to collect the tax debt from you. You also have to meet the aforementioned conditions to be eligible for innocent spouse relief.
If you filed a joint married return, the IRS can hold you and your spouse “jointly and severally liable” for the tax debt even if only one spouse received all the income or claimed improper deductions or credits. In some community property states, the IRS may collect past due taxes from your spouse, regardless of who owns the tax debt, or who filed and signed the tax return.
How Much Wage Can be Garnished?
The Consumer Credit Protection Act has set a limit on the amount that can be garnished from your wage, depending on the type of debt owed.
For most consumer loans, such as credit card loans, personal loans, and medical bills, creditors may garnish either 25% of your weekly disposable income or any amount that exceeds 30 times the weekly minimum wage.
For alimony or child support, 60% can be garnished, but if you’re supporting another child or spouse, your wage can be garnished up to 50%.
Meanwhile, 15% will be taken out of your wage for federal student loans and up to 15% for taxes.
How Can You Deal with Wage Garnishment?
There are several ways to deal with wage garnishment.
- You can file for Chapter 7 Bankruptcy to stop the wage garnishment.
- File a claim of exemption to protect a portion of your wage from garnishment.
- Find a consumer credit counseling service that can help you negotiate with your creditors, reach an agreement for a new repayment plan, and stop the wage garnishment. The National Foundation for Credit Counseling (NFCC) can help you find nonprofit credit counsellors who can help you with your wage garnishment issue.
- File an objection to the garnishment if the creditor takes too much money, fails to follow the proper garnishment procedures, or you’ve already paid your debt. You’ll find the instructions on how to file a written objection in the garnishment documents you receive from the court.
- Consult a lawyer so that you know what your rights are and what you need to do.
Conclusion
Is one spouse responsible for the debts of others? The answer depends on where you’re located and what kind of debt you have. If you’re located in a community property state, you and your spouse are liable for the debt you incurred during the marriage even if you were the only one who took out the loan. In common law states, your spouse will be held liable for the debt if you both sign for the same debt. If your spouse didn’t sign, then the debt is solely your own. When making financial decisions, such as taking a loan or acquiring assets in joint names, always consider how it will impact you and your spouse in the future.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
