Can a prenup or postnup save you from a spouse's debt?

If your spouse has a tendency to rack up debt, you could one day be on the hook for it. But a prenuptial or postnuptial agreement can help protect you – and your assets.

Maybe your fiance is coming into the marriage with a lot of debt and bad spending habits. Or you’ve learned that your wife has been secretly charging up her credit cards, threatening the family’s financial stability. Or perhaps your husband is taking on significant debt to launch a business, and you want protections in place that shield you from liability if it encounters trouble.

“Prenups and postnups can help protect you from debt that’s incurred by your spouse,” says Christopher Melcher, a family law attorney in Los Angeles. “They are not foolproof, but they certainly put you in a much better position.”

What are prenuptial and postnuptial agreements?

Prenuptial agreements:

Are signed before you walk down the aisle.
Are recognized in every state.
Establish how assets would be divided in the event of a divorce.
Can reaffirm that premarital debts are separate, establish that debts incurred after the marriage are separate and specify whose income will pay for specific debts.

Postnuptial agreements:

Are signed after marriage.
Specify who is responsible for specific debts, both during the marriage and in the case of a divorce.
Are not recognized in every state. State laws related to postnups vary. Many have no clear policy and a few states, including Nebraska and Ohio, do not recognize the postnuptial agreements.
Indemnify you against any financial harm resulting from your spouse’s debt.

Because both types of contracts are solely between you and your spouse, they can’t prevent creditors from coming after you for your spouse’s debts, Melcher says. But a prenup or postnup gives you the opportunity to follow up by forcing your spouse to reimburse you.

When are you on the hook for your spouse’s debt?There’s no question that a creditor can hold you fully liable if you are the joint owner or co-signer with your spouse on a loan or a credit card, even if your spouse did all of the spending.

Depending on where you live (such as in non-community property states), you are generally not responsible for the debt your spouse took on in his or her name alone, says John Slowiaczek, president of the American Academy of Matrimonial Lawyers. However, if you have jointly owned assets, such as a mortgage in both of your names or joint investment accounts, a creditor can go after your spouse’s interest in that property, he says.

And if you live in one of the nine community property states (a 10th state, Alaska, has an opt-in community property election), things get even more complicated. In those states, any assets acquired during the marriage are considered to belong to both of you, and you are both considered equally responsible for debts incurred by either of you during the marriage.

“If your spouse runs up $50,000 in credit card debt in her name in a community property state, it’s still your responsibility,” says Jeff Landers, a financial expert and author of “Divorce: Think Financially, Not Emotionally.” “Even in other states, if your spouse racks up debt buying necessities for the family, such as food or clothing, in a divorce the judge might consider it joint debt because you benefited from it.”

Student loans incurred during the marriage also can be viewed as joint debt if you both benefited, he says. “If his skills increase as a result of his going back to school and he gets a better job, and the family unit benefits from it, in a divorce (barring any postnup) the student debt could be considered joint debt even if it’s in one name,” Landers says. “The rationale is this: You enjoyed the benefits of the higher salary, so you shouldn’t be able to walk away from the debt.”

Creating agreements that hold up in courtPrenups and postnups can protect you in these kinds of situations, experts say, but they need to be carefully crafted to stand up in court. Judges tend to scrutinize postnups more carefully than prenups because of the risk of one spouse taking advantage of or coercing the other to sign.

To ensure acceptance, both spouses should have their own attorney and negotiations should be free of threats (i.e., “I’ll divorce you if you don’t sign”). Also, the contract should attempt to distribute assets equitably. “If the agreement doesn’t seem fair and just, it won’t hold up,” says Tara Scott, a family law attorney in Beverly Hills, California.

The other issue that can kill a postnup is an arrangement that looks like an attempt to keep a creditor from getting paid, Melcher says. In other words, if you keep most of the assets and give your spouse most of the debts and then your spouse files for bankruptcy a few months later, a creditor can challenge the agreement as fraudulent.

“If there is some good reason to load one spouse up with more debt – say, one spouse acted irresponsibly in creating it – explain in the agreement why you’re doing that,” Melcher says. “And then you should still ensure equal division of the property.”

Make sure your agreement clearly defines what belongs to each of you and who is responsible for each debt. Some couples also include behavioral provisions such as requiring one spouse to let the other spouse review all bills and check their credit score every so often, says Laurie Israel, a divorce lawyer and mediator in Brookline, Massachusetts. Those kinds of provisions can help couples agree to stay together if one has a spending, gambling or alcohol problem, or if there has been some other breach of trust.

“Postnups can be protective, but they can also be generous and support a marriage,” Israel says. “They can help couples deal with money issues and clean up financial misdeeds, and then the marriage can work better. I’ve done a lot of postnups, and many of these people are still married.”