Suze Orman Warns Against This Big Credit Card Mistake if You're Getting Married

Could you be on the hook for your spouse's credit card debt? 

Financial advisor Suze Orman shared a strong warning on a recent episode of her podcast. She implored couples to sign a prenuptial agreement before getting married to avoid being liable for their spouse's debt in the event of a divorce. Specifically, she recommended a prenup stating that "you are not responsible for any debt incurred after the marriage takes place."

This was in response to a caller who got stuck with her ex-husband's debt after he filed bankruptcy. As Orman explained it, spouses are liable for each other's credit card debt, even on individual accounts.

While Orman brought up an important point, she isn't entirely correct here. If you're planning to get married, or you already are, here's what you need to know about spousal credit card debt.

Are you responsible for your spouse's credit card debt?

There are situations where you can be held liable for credit card debt your spouse incurred during your marriage. Here's when this can happen, according to legal encyclopedia Nolo:

• You live in a community property state. In states with community property laws, both spouses are equally liable for debts incurred during a marriage, regardless of whose name is on the account.
• You're a cosigner on the credit card account. Any time you cosign on a credit card, you accept liability for the debt if the cardholder doesn't pay it back. That applies whether you're cosigning for a spouse, child, or friend.
• It's a joint credit card account. Both cardholders are responsible for joint accounts. Joint credit cards are rare, as most card issuers don't offer them anymore.
• The debt is assigned to you in a divorce proceeding. A judge could assign a debt obligation to you if they believe the debt is your responsibility.

To clarify, Orman was off-base in her explanation of this. She said that when you apply for a credit card, even as an individual, the application asks if you're married. If you say yes, there's fine print stating your spouse will also be liable for your debt on the credit card. I looked at some online credit card applications to double check, and they didn't ask if I was married, nor did they have this fine print.

If you don't cosign on your spouse's credit card or get a joint credit card with them, then liability on that debt will likely depend on where you live. In a community property state, you're equally responsible. Most states are common law states, where you're not responsible for credit cards that are only under your spouse's name.

Can a prenup protect you from spousal debt?

A prenup can help protect you from spousal debt, particularly in community property states where it would otherwise be shared between you both. As Orman suggested, you and your partner could set up a prenup with a debt clause stating that if you divorce, neither party is liable for debts created by the other person.

You can also designate which property belongs to each spouse. If property is jointly held, creditors could come after it for debts incurred by either spouse. If you've designated separate property in a prenup, then creditors would only be able to collect from property owned by the spouse who incurred the debt.

Note that a prenup doesn't guarantee protection. It's important to recognize that a prenup is a private contract between two people, you and your spouse. "Third-party creditors do not have to abide by the allocation of debts made by a couple in their private contract -- the prenup," Laurie Israel, a family and marital law attorney, told The Cut.

Still, if you get divorced, a prenup could ensure you aren't held responsible for your spouse's debt. It will depend on the circumstances of your case, but a prenup usually can't hurt.

Deciding if a prenup is right for you

Prenups can be a touchy subject. While some people have strong opinions for or against getting a prenup, it's ultimately a decision for you and your partner to make together.

There are ways a prenup can protect you and your partner. You can stipulate that neither is responsible for the other's debts, and you can each put in writing your respective assets. By the way, if you're already married without a prenup, there is the option of a postnuptial agreement, or postnup.

Orman believes a prenup is a must so that you're not liable for your spouse's debt. That may be true, but it's far more important for you and your partner to be on the same page financially. Make sure you both have open communication about money, any debts you have, and how you'll use credit cards. Ideally, you two will pay your credit cards in full every month and avoid this type of debt entirely.