Wife is cosigned on a credit card with her parents — real assets are also shared. How to protect my credit?

Question

A few years ago I got a credit monitoring app and started watching my credit score (high 700s). It's been climbing slowly and sends me an alert when I apply for new credit — like when I bought a car or applied for a Lowe's card.

Today I set my wife up with the same app. Her credit score is moderately lower than mine (low 700s). We discussed the details to try and find out why and I found out that she had cosigned with her parents on credit cards that have been maxed out, totaling low five figures. I didn't pitch a fit at the time. The total debt is a major inconvenience but it's not "We can't pay that off in our lifetime" money.

As I drove to work, I realized that like roaches, there may be more issues at hand. I knew that my in-laws are not financially sound but didn't realize the magnitude. I'm not trying to be judgmental - the recession hit them hard - but it is what it is.

Unfortunately, in addition to those cards, my wife's car is also titled to both her and her parents and more importantly, our bank account also has her mom's name on it*. Can those assets be seized in whole or in part in any unfortunate events?

Finally — my credit score seems healthy with no mention of those cards but my wife and I are married. Are there any active steps I need to take to prevent my credit from sinking?

TL;DR — My wife is on the hook for credit card debt and the car and bank account are shared with holders of bad credit. Can those real assets be seized? Since we are married, what do I need to do to wall off my credit score from that issue?

_{*I lost the fight on whose bank to go with when we got married and we just left the MIL on the account. My wife was a preteen when they opened the account so they put both her and her mom on it. My MIL doesn't have a debit card or checks so she'd have to go to the bank personally to make a withdrawal.}

Answer 1

Is your name on your account at all? If yes, you go to the bank tomorrow morning, open an account in your name, and move all the money over. Then tell your company to change their payments to the new account. After that, you explain to your wife. This is madness. (I’d recommend the same to your wife if a member of your family was on that account).

If your mother in law gets into trouble and bailiffs want money, they will go straight to the bank account with your money. If she dies and leaves everything to charity, they will go straight to your account.

If your name isn’t on it, talk to your wife because then she needs to take action.

Answer 2

Can those assets in whole or in part be seized in any unfortunate events?

If the vehicle is used by your wife primarily, then it is likely not at risk. The bank account is, the extent to which you are exposed depends on the state. In some states joint assets are considered equally owned while in others the ownership would be assessed based on contribution (in the context of bankruptcy). The greater risk is that they have access to your account, maybe they'd never use your funds, but who wants to find out?

Finally -- my credit score seems healthy with no mention of those cards, but my wife and I are married -- are there any active steps I need to take to prevent my credit from sinking?

Your wife's credit score will not affect yours, but if you ever apply for a loan together her score can hurt you. As a co-signer, she is on the hook for any unpaid bills, that is much more likely to hurt you than her credit score.

Answer 3

You ask a good question, but I think you are sadly mistaken in some of your views on personal finance. The first is a that a good credit score for you has much value. It has some, but credit score does not indicate wealth. The second misconception is that you are somewhat insulated from your wife's financial condition. You aren't and the bad things that are looming will happen to you as well.

The first thing, obviously, would be to have your MIL removed from your wife's bank account. The bank account should be for you and her both, and no one else. My wife and I have different bank accounts, however, we are both signers on each others. It is, really preferable that you two have one account so you can learn to work together on personal finance.

Secondly the credit cards in question need to be closed. MIL and FIL will have to fend for themselves with the revolving credit. However you two will have to pay these bills off yourselves. They don't have any money, and if they did they would manage it poorly anyway. It sucks but better to deal with it now then when the balances grow even larger.

Sure you can probably maintain your credit, and that bank account will not likely be seized, but that is not really the point. This mess needs to be cleaned up and you really do not want your financial future tied to these people.

Answer 4

You have a mix of family and financial problems here. What's smart to do financially may cause conflict in the family, and you have to consider that.

First question to me is why you set up these accounts like this. If your in-laws have bad credit and can't get a credit card without your wife cosigning it or some such, then getting out of this situation will put your in-laws in trouble, and thus presumably cause family problems. If it was just a matter of "oh, seemed like a good idea at the time", then much easier.

As others have said, this is a very dangerous situation. You're essentially giving your in-laws the legal right to spend unlimited amounts of your money and to run up debts for which you are liable. Even assuming that they do not deliberately take advantage of you, if they are irresponsible or careless they could cause you major problems.

Easy step 1: Stop using the bank account that your wife shares with your in-laws. Open a new account and put your money there -- that is, the money that belong to you and your wife as opposed to money that belongs to your in-laws -- not in the joint account. Withdraw your share of the money from the joint account and put it in the new account.

Step 2: As long as you don't deposit to the joint account, you reduce your risk, but you don't eliminate it. If your in-laws overdraw the account, as long as your wife's name is on it, you're still liable. So get your wife's name off the account, or close it. I've never tried to take one name off an account, frankly I'm not sure how that works with the bank. I don't see why they wouldn't agree to remove your name from an account that has money in it -- you're giving up an asset. That's not at all the same as saying "take this other person's name off this account". That would have the obvious potential to be trying to steal someone else's share of the money.

Step 3: You need to close the credit card account. I'd tell the in-laws that this account is hurting your credit rating and you need to close it. They are certainly free to open up a new account on their own, you couldn't stop them from doing that if you wanted to. If they don't accept that, there could be a family fight, but I think you have to bite the bullet and do it. When you close a credit card where you still owe money, of course you still have to pay off the existing balance, but the bank will de-activate the card so no new purchases can be put on it. Once you pay it off, the account will completely close.

Of course all this depends on your wife agreeing to go along with these steps. If she says "no, I want to keep these accounts" for some reason, you have a family problem. How you deal with that is an entirely different kind of question. Whether by threatening to break china as gnasher729 suggests, going to a marriage counselor, murdering her and disposing of the body, or what. It may not be possible to separate your finances from your wife's. In community property states, the law explicitly says that all property is owned jointly. I'm not sure how it would work in other US states and other countries.

Answer 5

From my experience, this is an emergency. Sorry to say. I think you know the first problem you must work on is interpersonal, not financial.

Why is it an emergency?

• your wife didn't tell you about this situation before your wedding.
• her bank account belongs to her mother.
• the credit cards with high balances on them are a bright red flag.
• you've said confronting your wife with this situation will damage your relationship. Ask yourself whether she has, by keeping secrets, damaged your relationship.

If I were you (I've been you, when my spouse and our adult child had shared credit cards) I'd deal with this right away.

What if somebody in your wife's parents' household has, or gets, gambling or drug problems? Rationality and fairness will not be factors in that case.

First, I'd find a competent marriage counselor to help you strategize this, and to be on-call if it causes a huge blowup in your marriage.

Second, I would ask my wife to kill the credit cards to which her parents are making charges. By "kill" I mean tell the card companies to disallow future charges. Your wife can get a new credit card in her sole name. She should do it immediately, without giving you excuses, because of the accrued debt. If she doesn't, that's why you have the marriage counselor. You need to be polite but unbending about this.

You can start the conversation by saying, "when I found out your parents ran up a lot of debt on your credit cards, I honestly felt betrayed and frightened. We need to be in this together. Please, let's work together to sort this out. I think the first step is ... What do you think?"

The formula:

• describe the bad behavior
• explain its emotional effect on you
• ask for a realistic change
• offer to help.

Third, once the second step is done, I'd ask her to open a bank account in her own name and move the balance of the joint account to the new account. And, if your wife's employer direct-deposits her pay, move that to the new account.

Fourth, I would ask your wife "is there anything else?"

Fifth, I would have a conversation with her about how your household can support her parents' household. Do they need money? If so you can figure out how to give them some, perhaps by making a regular deposit to the joint account.

Sixth, you and your wife should be on the same page, or close to it by now. Have a conversation with her parents about money and so forth. Keep in mind that the conversation will really be about your mother-in-law losing her baby girl.

Good luck and courage to you.

Answer 6

A few things I would add that have not been mentioned in other answers:

1) You should determine whether you live in a common law property state or not as this can significantly change how much liability you are incurring from her financial entanglements.

2) Regardless of if you live in a common law property state or not, her credit score is not a huge issue in most cases if you are okay not including her on titles. For instance, when I bought my house, my wife did not have much credit. We actually had to take her off the mortgage paperwork to get the loan approved, even though I live in a community law property state (see previous link) so she was just as much an owner as I was, regardless of what the mortgage or title says.

3) Especially if you live in a community law property state, and you are worried, you may want to approach your wife about drafting paperwork where she willingly signs over big ticket items to you, or to a trust you setup that she is not part of (except in the event of your death). This will give you a fighting chance if it ever becomes an issue, and will certainly complicate the process of a third-party taking your property. Of course, this requires significant, mutual trust.

4) Repeating a bit of what others have said, you should create your own bank account, and your wife should create her own bank account without her parents on it. This at least will require much more court involvement for a third-party to access the money. If the parents' names are on the account or on the car, they are fair game for reprisal on loan default. Get the car transferred to your wife or even better, to you, as soon as possible.