Car Reaffirmation

[yomama]

Our lawyer sent us some papers to sign to reaffirm my husband's car because we had already told him that my husband wanted to continue making his car payments so he could keep his car. It was indicated for both of us to sign the papers. I reluctantly did. I said to my husband that it was his car and why did I also have to sign, and he said it's because we're filing BK jointly. Now I'm worried because I'm not working right now and if something would happen to him, then I guess I'd be totally responsible for paying off his car along with the other bills that I already wouldn't be able to afford. My husband told me that since we're married I already would have been responsible for paying off his car even if we weren't going through BK. Are a husband's debts automatically the wife's debts and vice versa if that spouse would die or become incapacitated and not able to work to pay off those bills? I guess if that's the case then I'm also responsible for paying off his $20,000 in school loans and I was already wondering if he'd get them paid off before he retires in about 10 years.

[HHM]

There are a lot of "if's", "and's" and "but's" that would be involved in answering that question, so I will keep to the "general" rules.

First background principle is that, vis-a-vis the world, a married couple is a single financial entity. If the husband buys a car, it is both the husbands and wife's car regardless of how it is titled, etc. Any debt incurred "while" married will give rise to joint liability for that debt, regardless if the other spouse signed off on the loan or not. School loans are a little different story, those live and die with the individual who received the education benefit.

There are a lot of caveats to the above, but in a nutshell, you had to sign off on the reaffirmation because it was a joint BK.

Granted there are tremendous caveats to how debt is treated, but frankly, you're a married couple, you are in this "together".

[yomama]

HHM, Thanks so much for your reply. I feel better in several ways. First of all, I'm relieved that I did the right thing signing the reaffirmation agreement. I thought that maybe the lawyer hadn't understood that my husband was the only one who had signed for the car loan and that I was signing something I didn't have to and making myself responsible when I wasn't before, but I see that's not the case. Also, I'm relieved that the school loans wouldn't be my responsibility. I was kind of opposed to him going back to college at his age to begin with. I could have understood if it was a step up making more money, but he's making a lot less now than he did when he worked at the boys' prison that he was working at up until last year. I thought the general idea of going to college was to better yourself, but we're going backwards financially in that respect. I am so grateful, however, that we are being given a second chance in life and being able to wipe out our $60,000 of cc debt. That is/was a huge weight over our heads. It's technically not gone yet as we aren't discharged yet and still have to do our debtor education and get the certificate and give it to our lawyer to file, but we're heading in the right direction. I know that you can understand how we feel. I'm not sure how we'll get our credit score back up, but we're staying away from credit cards completely...we're not getting caught up in that again. Anyway, I really appreciate your reply.

[kcj]

I would have been reluctant to sign as well. I don't understand why you would have to sign a reaffirm if your name is not on the loan. Our old law reaffirmations were only signed by the person whose name was on the debt.

[yomama]

I would have been reluctant to sign as well. I don't understand why you would have to sign a reaffirm if your name is not on the loan. Our old law reaffirmations were only signed by the person whose name was on the debt.

You and I must think alike because I signed it very reluctantly. If I wouldn't be for the fact that I trust our lawyer, I would have even looked into that before I signed it, but since he had marked with an x that we should both sign, that's what I did even though I didn't like it. I guess maybe I had been under the wrong assumption that whoever takes out the loan is responsible for paying on the loan and that it would be nobody else's responsibility. I had once asked a person at one with one of our credit card companies (before all this BK stuff) if both my husband and I were responsible for paying on the card. I was told that whoever's name it's in is the one who is liable for paying on it. If it were in my husband's name and something were to happen to him that he couldn't make the payments, I wouldn't be reponsible for paying the balance. I wonder if that's true. If that's the case, then I don't understand why something like a car loan doesn't work the same way.

[HHM]

If we want to get into the details of the how and why?....

When it comes to unsecured debt, what the credit card company told you is basically true, the persons name who is on the card, is liable. But since you are married, nearly all your assets are "joint" assets (even in non-community property states, there is the presumption that if the asset was bought while married, it is a joint asset). So even though in a strict legal sense, the non-signing spouse is not personally liable, the assets of the marriage are (follow me so far?) So, for example, if your husband stopped paying a credit card, and the credit card got a judgment against him, any non-exempt asset or equity, joint or otherwise, can be used to satisfy that judgment (except that your wages could not be garnished)

When it comes to secured debt, the connection is a little more direct...(just like in the case with the car). Even though one spouse may have signed on the loan without the other, the car is a joint asset. If there is ever a default in payments, the car gets repo'd regardless of the non-signing spouses interest in the car, or the fact that she did not sign on the loan.

When a spouse dies, the decedent spouse's interests in the assets and liabilities of the marriage become part of an Estate. Again, even though the other spouse does not have "personal" liability, some aspect of the assets of the decedent estate are liable for those debts.

Thus, in general, it is true that when it comes to unsecured debt, a non-signing spouse is usually not liable for the debt. When it comes to secured debt, the asset is pledged as security, and therefore, in the sense that the non-signing spouse will lose their interest in the pledged asset upon a default, they are liable.

The reason you had to sign the reaffirmation is no more complicated than the fact that you filed a Joint BK.

Again, there are a lot of in's and out's to what I said here.

[kcj]

Thanks for that explanation, HHM. I understand what you are saying... but I don't like it

[yomama]

Yes, thanks for explaining that, HHM. If I wouldn't know any better, I'd swear that laws were made complicated so that we'd need lawyers.