Q A few years ago, the man to whom I am now married tried to establish a business. It folded and he inherited the debts. Rather than declare bankruptcy, he took a job and now, three years later, has paid off at least half of these debts. He hopes to pay the balance by the end of 1989. Using my money, we are planning to buy a house. What steps, if any, should we take at settlement to ensure that his business associates are not able to seize our home for business debts they contend are still outstanding? We will take a term insurance policy, but I am worried about the possible consequences of having the house in both our names. What should we do? Would the use of my maiden name act as a stopgap or deterrent?
A. There is an easy answer to your question. If you take your title as tenants by the entirety, unless both of you have created a debt, the individual creditors of either you or your husband will not be able to attach that house. Taking title as tenants by the entirety means that you own the house together, and it is not breakable into parts. Thus, the fact that your husband owed a lot of money should not be a factor for those creditors, because they cannot attach the whole house.
However, your husband's current debts may be a factor in determining whether anyone will make a loan to both of you. It may be necessary to explain the debts, and indicate that progress has been made and that you are trying to clean up those debts within the next few years.
It also may be necessary for you to take the property in your own name, provided, of course, that you can qualify on your own for a loan. On the other hand, if you have all cash and are prepared to put all of the cash into the property, then I would recommend strongly that you take title in both of your names, as tenants by the entirety.
I do not recommend that you take title in your maiden name, because this is not really your legal name and, more importantly, a creditor might argue that you are trying to defraud him or her by using a name that is not proper.
Before you apply for a loan, it might be a good idea to assess both of your financial histories. I suggest that you contact a local credit bureau and obtain your credit histories. The fee should be nominal.
Once you obtain this credit history, you should get a better picture of your financial situation. It may be that your husband's credit rating is so bad that no lender will want to consider him creditworthy for any new obligations -- especially one as large as a mortgage loan. If this is the case, then, as I have indicated, it may be necessary for you to qualify on your own, or come up with more cash down so that you will be able to qualify.
When you go to settlement, make sure that you have your attorney present so that your interests will be protected. You do not want to find out several years down the road that your creditors can attach the entire house merely to satisfy the obligations of your husband.