Almost everyone wants the fairytale romance and a happy ending. These days, however, it pays to be a little less romantic and slightly more pragmatic when it comes to matters of marriage. The status of your debt and subsequent union can have far-reaching implications on the rest of your life.
How do the different types of marriages affect your debt?
Marriage in community of property
In a nutshell, this refers to "what is yours is ours, what is mine is ours and what is ours is ours", all jointly. This includes debt made while you are married, and even debt that you and your spouse had individually before you were married.
According to attorney, Rynhardt De Lange "when parties are married in community of property, their individual assets and liabilities are joined together in one estate. Should the marriage be dissolved through death or divorce, the surviving or divorced spouse is entitled to 50% of the joint estate — which includes assets and liabilities not acquired by that spouse."
What does this mean in real life?
- If one of you goes out and spends wildly on a credit card binge, both of you are liable for it. That expensive motorbike, that divine necklace and that fabulous baby shower you threw your sister on the your credit card is 100% the financial responsibility of both partners in the marriage.
- Even if your partner makes debt in his/her name alone, the creditor can go after both of you for that debt.
- If your partner has debt before marriage, you will also be liable for the full debt and debt repayment to the creditor.
- When you are unable to keep up with your everyday living expenses and debt repayments and you opt to go under debt review, it will have to be a joint application, even if the one spouse has little or no debt to their name.
It is always good to remember that being married IN community of property is the default marriage regime in SA.
So unless you have an ante-nuptial contract (also known as a "pre-nup") agreed upon and drawn up by an attorney when getting married by a licensed marriage officer (even if it is at Home Affairs), your marriage is considered to be in community of property and all of the above applies.
The other popular types of marriage contracts in SA are:
1. Married out of community of property (Ante-nuptial without accrual)
This means that on paper, you are two separate financial entities. Your possessions and debts are yours - and your partner's possessions and debts are theirs.
Should you be separated by divorce or death - you keep what you had before you were married, as well anything that you acquired during your marriage.
2. Married out of community of property, with accrual (Ante-nuptial with accrual)
With this, both parties maintain their separate financial identities, but everything that they earn, or the growth of their assets during marriage is evenly divided between them. Some things like inheritances are excluded from this.
3. Customary marriages
These type of marriages are regarded as out of community of property in South Africa, though much legal work is being done to have these recognized by law, especially in cases of death and divorce.
The best thing to do before taking the big step into marriage, is to take the time to consult with an attorney, a financial planner and/or a debt counsellor before you take the plunge.
Wrapping up
A registered debt counsellor is obliged to ascertain your marital status and marriage type before placing you under debt review. Also make a point of it to discuss your individual finances before you are blinded by the glare of love, and unknowingly say "I do" to a mountain of debt you were not prepared for.