21 Jul Debt Stress and Marriage
The amount of debt carried by a married couple is a strong indicator of divorce. The old adage of don’t talk about religion and politics doesn’t hold a candle to married couples disdain for talking about debt according to a recent story on Reuters.
Generally there are two types of debt in a marriage, debt that the individual brought into the marriage and debt that the couple after having been married accumulates.
PREMARITAL DEBT IS A STRESS ON MARRIAGE
Premarital debt is difficult because often the individual who does not have the debt questions why it is their responsibility to pay back something they didn’t incur.
Examples include credit card debt, personal loans, medical debt and student loans. Student loans now account for 1.2 trillion of consumer debt. Student loans are also not dischargeable in bankruptcy.
The key to deal with premarital debt is to know what each person coming into the marriage has for debt and what their plan is to satisfy the debt. Failure to disclose the debt and failure to plan on how to satisfy the debt has been proven to create a tremendous stress on a new marriage.
In a number of cases I have discharged debt through bankruptcy prior to the marriage. The discharge through chapter 7 ensures a clean slate to start the marriage.
Again chapter 7 will not discharge student loan debt.
The reason to file prior to the start of the marriage is because the qualification for chapter 7 in Minnesota is based on where you live, how much you earn and the number of individuals in the residence. If you are married your spouse’s income is used to calculate the gross income.
This is true even though the debt is not joint debt.
ACCUMULATION OF DEBT DURING THE MARRIAGE NEEDS TO BE MANAGED
Even if you are married and have unmanageable premarital debt that is causing stress a Chapter 7 or Chapter 13 can discharge the debt and take the stress out of the situation.
Married couples who have accumulated debt either jointly or as a result of one of the partners need to deal with the debt in two ways. First a plan needs to be implemented whereby future debt is controlled. Second, a plan needs to be setup to eliminate the debt as quickly as possible. The longer the debt exists the more stress on the marriage.
The plan to control future debt is best achieved through communication. In most marriages there is a spender and a saver. Both the saver and spender have to be realistic and have goals for the future. Usually having a short term emergency fund of 3 to 6 months of net income as well as a retirement goal is a good place to start.
After the establishment of the plan, I recommend a Russian approach, trust then verify. The annual or quarterly review of credit reports, the monthly review of bank records, the weekly review of budget and the daily discussion of expenses. The more you discuss finances the easier it becomes.
Once the plan is established on how save and budget the next step is how to deal with the debt you have accumulated. Be realistic on the ability to repay the debt and what the status of the debt is.
Many of my clients have struggled far too long with debt that could have been managed. Many try repayment plans without first establishing a plan and fixing the systemic problem. Many have tried debt settlement schemes that have a success rate of 10 percent or less.
Many do nothing until a judgment has been taken and money is being garnished or bank accounts have been levied.
Every one of Bolinske Law’s plans are individually tailored to solve the problems our clients are facing. We can stop creditor harassment, lawsuits, judgments and garnishment.
Meeting with one of our attorneys is free and will result in a plan on how to deal with the debt that has accumulated. The meeting takes 30 to 45 minutes and will emphasize the best option on how to take care of the debt.
No Comments