If you think that any of the following scenarios sounds like it could apply to you, then be especially careful and think seriously about seeking legal counsel. The issue of unknown debts can be quite complicated, especially if you reside in one of the nine community-property states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. All of the other states are called common-law states and treat marital income differently than the community-property states do.
Many individuals have found themselves in very difficult situations because they didn't know about the debts that they had incurred due to the actions of another person �generally a spouse or business partner. Whether you're a man or a woman, it's possible that you could be in debt and not even know it. Here are some of the most common debts that can avail themselves when you least expect:
- If you're married and live in a community-property state, you are not only the recipient of half of your spouse's earnings, but also of half the personal debt accumulated during your marriage, whether it was accrued with or without your knowledge. In other words, if your spouse obligates him- or herself for a business or personal debt, it's likely that you're legally responsible for half of that debt, even if you had no knowledge of it and would have never agreed to it. Additionally, you may owe one-half of the debt that your spouse has personally guaranteed, such as office or equipment leases. Again, this holds true even if you didn't know about the obligation and signed nothing approving it.
- You may be responsible for one-half of any Internal Revenue Service (IRS) obligations while you are married, even if you didn't personally participate in the actions that caused the debt and didn't know anything about it. As far as the IRS is concerned ignorance is not a valid excuse, although it does incorporate innocent spouse legislation to help provide some relief.
- You may have liability if you serve on a board of directors and the organization is sued, even if it's a nonprofit organization such as a school.
- If you have minor children and they have credit cards, this could mean that you've extended tacit approval for their charges, whether knowingly or not. If your kids run up bills that they can't pay, you may be liable for the charges.
- If you're in an automobile accident and the injuries exceed the limits of your policy, you can be sued for damages. The same holds true for homeowner's insurance and accidents.
- If you're divorced, you may still be liable for joint accounts. You must actively close them or ask in writing to be removed from them.
It's vitally important that you understand the financial assets and debts of anyone that you have a partnership with, whether that partnership is personal or business-based. You must also be aware that there are ways to protect yourself from unforeseen liabilities. These can include setting up corporations to contain debt and protect personal assets, pre-nuptial agreements to define individual liability and asset distribution, and legal agreements and insurance to protect yourself from possible lawsuits.
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