> It's certainly bad for individuals, and by extension their families.
When gambler makes debt, then the partner gets half the debt in divorce. And they have to pay it.
It is not bad for families just "by extension". It is directly harming the family members even after the divorce.
Personal gambling debt is individual unless credited to a joint account no?
There's quite a lot of confusion about this question here.
You are right that debt of this type are individual and other parties (spouses, heirs) can't be pursued for it. But it has to be taken into account in a divorce.
Johnny and Janey have a $1m property, $200k savings, $200k retirement between them. They should each get $700k from a divorce (assume they were penniless students when they got together and acquired all the assets during the marriage).
If Janey* wants to stay in the house, she only has to borrow an extra $300k to buy Johnny out. That plus her share of the financial assets, pays for his share of the house.
Now Johnny reveals that he owes half a million in credit card debt that he never told Janey about. She can't just say "That's your problem, it comes out of your share." The marital assets are diminished by that amount before division.
Janey now gets $450k, an even split of the net assets. She has to come up with $550k to keep the house, effectively paying off half of Johnny's gambling debt as well as buying out the difference between the house and the financial assets.
If she doesn't try and keep the house, the cash she gets represents half of the assets minus half the debt. If Johnny owes $2 million, the married couple together are $600k negative. For her to leave the marriage, she has to pay half of this towards Johnny's debts. So she will have to come up with $300k cash to give him, on top of losing all her assets.
Of course, Janey married Johnny for better or worse, and that includes his gambling addiction. But it might feel unfair to Janet, especially if she didn't know about the gambling and couldn't have done anything to stop Johnny running up the debt. And Johnny's lawyer makes sure Johnny dredges up everything he owes in the negotiation, the opposite of the situation with assets where a sharp lawyer might tell Johnny to tread lightly owning up to his gold coins/offshore account. In the worst case Johnny hits Vegas when the divorce seems to be inevitable, knowing that the losses will go into the joint pool, whereas his winnings can be spent on partying or pocketed in cash.
* Divorce participants' behavior is stereotyped by gender. Apologies to all the thrifty houseproud Johnnys and louche deadbeat Janeys out there.
> She has to come up with $550k to keep the house, effectively paying off half of Johnny's gambling debt as well as buying out the difference between the house and the financial assets.
It is even worst - Jane has to pay half those debts even if she dont care about house. If assets minus debt go negative, which they do in case of gamblers, partner is in debt.
That is why the forst advice to partners of gamblers is to divorce asap. Because they easily end up paying for years.
Yes, good point, I am editing the answer just so that it's not misleading.
You don't have to go into debt for it to be a problem. If one spouse spends money gambling, it's still gone from the other one's savings.
I live in a community property state, all of my accounts are owned by the marriage regardless of how they're titled. I would imagine legal debts are similar. There's some exceptions and I suppose gambling debt could be one, but I would expect the default to be that the debt holder could collect from assets held by either spouse.
This will vary greatly from one jurisdiction to another. It can also depend on the specific kind of marriage.
Yes, some marriages are "community of property", some are not. Even in community of property though some debts may be on the individual not the couple.
So one cannot really talk in generalities regarding this.
In marriage, stuff you acquire during marriage is "common" no matter which accout you used. The same applies to debt. (Pre existing assets and debts are purely yours).
The common stuff then splits half half unless there was prenup or something.
This very much varies state-by-state (ignoring prenups and emergency med treatment as edge cases). In my marriage and state (FL) debts incurred by me remain my own. Wifey owes none of it. Compare with states that have community property or purchases made as tenants by the entirety.