Am I Responsible for My Spouses Debt in Australia (2024)

FAQs

Am I Responsible for My Spouses Debt in Australia? ›

You will have to pay your spouse's debt if you're a guarantor or joint account holder if they default on payments or pass away. However, if no liability agreement exists, you won't have to pay any debt, regardless of their relationship with you.

Am I legally responsible for my spouse's debt? The short answer is no. Whether marriage, de facto, or fling, you are not legally responsible for your partner's debt.

You are generally not responsible for someone else's debt. When someone dies with an unpaid debt, if the debt needs to be paid, it should be paid from any money or property they left behind according to state law. This is called their estate.

The clear answer here is no. You can't inherit someone's bad credit or loan repayments, assuming you aren't a cosigner on the account. All the outstanding balances will be drawn from your loved one's estate. The estate includes their money, superannuation death benefits, and other assets like life insurance.

Am I responsible for my husband or wife's debt? Being married to someone doesn't mean you inherit their debts. If you don't have joint finances, like a mortgage or joint bank account, then you can't be made liable. The same goes if you change your surname when you get married.

A debt may be 'Statute Barred' (too old to pursue) because the Limitations of Actions Act 1958 (Vic) places a time limit on how long a creditor has to take legal action to recover a debt. For most debts, a creditor must begin court action to recover the debt within six years of the date you: Last made a payment.

You can protect yourself from your spouse's debt by signing a prenuptial agreement before you get married and avoid taking out joint credit. It's especially important to protect equity in your home during a divorce to ensure you get your fair share, since this is likely the largest asset you have.

If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.

Being pursued by creditors: If you live in a community property state and your spouse is facing legal action for personal debts, creditors can often go after joint assets.

How to Not Be Responsible for a Spouse's Debt in a Community Property State. Couples in community property states can sign pre- or postnuptial agreements to treat debts and income separately. However, a contract between you and your spouse only won't affect whether a creditor can pursue you for debt (they still can).

What happens if you have debt in Australia? ›

If you fall behind on repayments, your lender may use a debt collector to help recover the debt you owe. Your debts can also be sold onto a debt collector, so that they now own the debt. Debt collectors may contact you by phone, letter, email, social media or in person.

Legally, there is nothing stopping you from leaving the country if you have debt, unless the Australian Taxation Office (ATO) issues a Departure Prohibition Order (DPO) against you. What is a DPO?

Additional examples of unsecured debt include medical debt and most types of credit card debt. If you die with unsecured debt, repayment becomes the responsibility of your estate. Your legal estate refers to all the assets, property and money left behind by you or another deceased person when they die.

Debt liability in common law states

If your spouse owns a credit card that is solely in their name, you are not liable for their debt. But creditors do have recourse to your spouse's share in any assets that you own jointly with them. And if you are a joint account holder on a credit card, both of you will be liable.

Any debts either spouse had before marriage remain their own responsibility, with one notable exception. If you cosign a loan for your significant other or open a joint account on a credit card before you officially tie the knot, you're both responsible for the debt after your marriage date.

Typically, heirs are not held responsible for a deceased person's medical debt, unless they have explicitly agreed to assume responsibility, or if the spouse resides in a community property state. In community property states, the spouse might be liable for half of the medical debt accrued during the marriage.

If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.

Credit Cards That Are In Your Name Only

So, if the credit card is only in your spouse's name, you're typically not liable for that debt. But keep in mind that if you have jointly owned assets, then the credit card company can still go after your spouse's interest in that property.

Any debts either spouse had before marriage remain their own responsibility, with one notable exception. If you cosign a loan for your significant other or open a joint account on a credit card before you officially tie the knot, you're both responsible for the debt after your marriage date.

The court generally takes the position that debt incurred during the relationship (whether jointly or individually) was for the benefit of both parties. This means that, even if one person has most of the debt in their name, the debts are considered the equal responsibility of both parties.