RESPONSIBLE FOR SPOUSES’ CREDIT CARD
Credit card debt
Credit card debt is the same. If you allow your spouse to use one in your name you alone will be legally responsible for the debt.
There is no way to avoid the fact that money can have a negative impact on a marriage. Coach Love explains that “financial infidelity,” which involves hiding money from the other or buying things, is one of the main causes of marital conflict.
Coach Love encourages dialogues moderated with someone who has expertise in debt management and family finances. You don’t have to pay any fees if you are on a budget.
Couples regularly cite finances as a cause for marital strife. According to several studies, around 40% of respondents stated financial problems — “financial imcompatibility” — as a result of disagreements regarding priorities and values that surround money decisions.
“Financial transparency and having honest conversations can improve a couple’s relationship.
Weddings are magical and positive events. As the happy couple vows to have each other in every possible way, even for those who are wealthier or less fortunate, tears of joy flood their eyes.
But a wedding does not mean a marriage. A honeymoon is not permanent. A fever that started as a hot fever can quickly cool down by outside forces. Vows may be broken. Splitting up can have repercussions that go beyond the emotional. One practical consideration to consider: Will your spouse be responsible for your credit card debt, making you potentially poorer than yourself?
It can happen to anyone who is unprepared, uncommunicative, financially reckless, and/or ill-prepared.
Here’s an idea. Before you tie the knot, discuss your financial expectations. Unromantic, you say? “You’re about for marriage,” says Chicago divorce attorney Russell Knight. “This is the biggest romance killer. You can get used to talking money.
If you are ready to divorce and the ship has already sailed, there are two important factors that will weigh heavily: Where you live as well as how intertwined and entangled your finances. The better your financial untanglement with your spouse is if divorce is inevitable. Or, at the least, the better the financial untangling.
How to use the Debt Avalanche
Take the time to create a ledger with each of your credit cards. Make sure you note the interest rate at top of each entry. You can then make entries for any other debts. The following are the payments required for each month: student loans, mortgage payments (HELOCs), home equity lines of credit, car payments, medical bills, and other obligations.
This is your data list. Next, take a look in your savings account. Is there at least six months’ worth of income in an emergency fund? If not, start to save money for the future. Once your emergency fund is in order, you can begin the avalanche.
Secured debt is the type that has collateral such as your house or an automobile and almost always attracts lower interest than an unsecured loan (e.g. You should be focusing on the unsecured debt. You can use your ledger as a guideline to begin putting your uncommitted monthly income towards the payment of the highest interest rate balance. It doesn’t matter how large or small your balance is, you just need to focus on the highest-interest balance first and then pay the minimum amount on the next highest.
When to Use an Avalanche vs. a Debt Snowball
Some financial advisers advocate the debt snowball approach to paying down balances. The debt avalanche is more cost-effective, but the debt snowball can provide more immediate pleasure. It gives the user a sense that they are making progress towards paying off credit card debts.
The debt snowball can be described as the opposite of the debt spiral. Debtors pay off the minimum balance of unsecured debt first. Then they move to the next lowest balance, no matter how high the interest rates. It could take months to pay off large amounts of debt on credit cards with high interest rates. Advocates for debt snowball claim that it can discourage debtors making it less likely that they will follow a get-out of-debt program.
Bottom line: Although the debt avalanche approach saves money and pays off your debts faster, it can be difficult to maintain discipline. The debt snowball gives the feeling of victory when you pay off a credit card balance. However, you will probably pay more interest after you settle your debts.
Community Property States
It’s not a good idea to live in a “community property state,” where all assets are shared 50-50, after a beautiful marriage ends in an ugly divorce. Financially responsible spouses will be happy to know that there are only nine such states: Arizona California Idaho Louisiana Nevada Texas Washington New Mexico Washington Washington. Alaska, a 10th state, is an opt in community property state. Couples can choose to have their assets and debts included in their two-person community.
In such states, all property acquired during marriage is usually considered equally to be the spouses’. It is their “property” from the formerly friendly “community”.
There are variations between states, but the rule of thumb is that anything bought during marriage which can be considered as improving the two person community is community property. Also, any debt that is incurred as a result of these purchases (mortgages, auto loans, student loan debts, credit card debt) is considered community property.
There is one exception: Gambling debts are not shared by partners who have taken on debts that are detrimental to the community. Gambling winnings on the other hand are community property.
Chicago attorney Knight also notes that it is rare for debts acquired in “nonmarital activities” to be shared. For example, spending money on drugs or having a relationship. Divorce law is not likely to add insult to injury in these cases.
Common Law States
Only your personal debts are subject to the 41 “common-law” states. You should think carefully before opening a joint account. Know what you’re getting yourself into before you sign your name to an Account.
Raymond Hekmati, Beverly Hills, Calif., family law attorney, recommends to clients who have arguments about money to consult couples counselling. Hekmati also suggests that clients meet with a jointly accountant/wealth advisor in order to review their finances. An expert’s guidance can make a difference in your marriage.
Attorney Hekmati stated that while there may be some concerns about debt, it is possible to talk about how to grow the community, invest more, build wealth, and share this information with our children.