Discussing
Finances
With Spouse Heads Off
Future Problems
By Robert K. Heady
Bank Rate Monitor
Twenty-five
years ago the main problem leading to divorce was sex, according
to marriage counselors.
Today it's money.
"'Till Debt Do
Us Part' seems to have replaced `Till Death Do Us Part,"'
says Paul Richard, executive director of the Institute of Consumer
Finance Education, San Diego (www.icfe.info). "There are
now fewer first-time marriages than those who are going at it
a second time. About 50 percent of domestic meltdowns are rooted
in the family's finances, often because of some hidden problems
with credit and debt, a repossession, or a bankruptcy that were
never disclosed before marriage."
In most cases, it's
the wife who gets hit by the spouse's (or former spouse's) credit
problems. She learns the bad news too late, causing blemishes
on her own credit record and making it impossible for her to
buy a home because of an unfair divorce agreement.
Or, take the case of
a guy we'll call Joe, who wound up requiring counseling from
Consumer Credit Counseling Services in Atlanta (800-388-2227).
Two years ago he discovered that his wife had seven credit cards
in her name, with monthly bills going to her private post office
box number. On two other cards, she forged his name. Joe helped
his mate pay off all the bills, but one year later she again
was caught up in a credit card debt mess, and the couple soon
got divorced.
"With so many
people getting remarried and carrying baggage from their first
marriage, the most common problem is that they welsh on their
credit agreements" and the problem spills over to their
new spouse, says ICFE's Richard.
The key, all financial
experts agree, is to have an amicable chat with your potential
partner before marriage, not after about his or her finances.
That includes their spending and savings habits, credit history,
car loans, student loans, insurance coverage, and investing.
You say your mate won't let you look at their personal credit
record." Why?
The worst situation
can occur when the couple has both of their names on a joint
account, such as a credit card. If one of them defaults, or if,
say, your ex runs up tons of debt after you're separated or divorced,
you're on the hook for payments. In some states that have community
property laws, such as California, you could be liable even if
your name isn't also on the credit card.
When a couple splits,
there's usually a separation agreement or divorce agreement that
spells out who's responsible for paying what. Better you get
advice from your attorney on how to make sure you don't get tagged
for what you don't owe, suggests the well-known husband-wife
writing team of Gail Liberman and Alan Lavine, who co-authored
the best selling book, "Love, Marriage and Money" (Dearborn).
"If you've been married to an irresponsible individual,
you don't want your name on any joint accounts.
But the best advice of all is for the couple, before engaging in holy matrimony, to pay off as much of their past debts as possible.
Either way, if there's a divorce in the offing, never let a former spouse "take over" responsibility for payment of any jointly held debt as part of any agreement. This stupid move could come back to haunt you until everything is paid in full, warns ICFE's Richard. "The reason is creditors are not part off the divorce agreement, and in most instances probably wouldn't approve of the arrangement any way."
"Protect your good rating and avoid future damage by insisting that all debts mutually held by the couple before the divorce be either paid in full or separately refinanced by the individual who is to assume the debt," urges Richard.
Editor's Note: Robert K. Heady is the founding publisher of Bank Rate Monitor. He invites Bull & Bear reader mail on consumer money problems and solutions but cannot respond personally to all inquiries. Send e-mail to jrnl8888@aol.com, or write to P.O. Box 14875, North Palm Beach, FL 33408.
