Debt Consolidation for Married Couples

Financial issues and debt are difficult for nearly everyone to deal with and to plan for, so when a couple marries the difficulties tend to multiply. While financial planning is not one of the most pleasant collaborations between spouses, it is absolutely necessary in order to maintain healthy finances – as well as a healthy relationship.

Most individuals have some form of debt that must be repaid such as mortgages, student loans, auto loans, or credit card debt. In order to make your and your spouse’s finances work for you, it is imperative that both of you work together to avoid unnecessary debt and to handle debt that already has been incurred.

Avoiding Debt in a Marriage

The ideal debt situation is, of course, for a couple to enter into marriage without any debt whatsoever, but this is unlikely. At the very least then, whether marriage is still in your future or you already are married, you and your partner both should strive to avoid unnecessary debt.

Communication

It probably sounds like a cliché by now, but communication really is the secret to a good marriage – the financial aspects of it anyway. The sooner the better in a serious relationship, the couple should discuss openly, honestly, and completely, the details of their financial situations. They should share banking, checking, credit card and credit information, and should disclose any and all debts that they owe.

If this conversation comes before marriage, then each partner should try to develop a plan that will eliminate a majority of their debt beforehand. If the couple already is married, then they might prefer to come up with a plan together.

Discussing your financial concerns and goals absolutely should not be avoided. It is when individuals ignore their finances and hope for the best that problems arise. Cover everything – investments, life and health concerns, estate planning, etc.

Discuss with your partner your financial goals in both the near and the distant future. For example, if you would like to purchase a home within the next few years, then discuss how and when you expect to achieve your goal. Developing and sticking to a budget really is the best way to plan for the future and to avoid future debt.


Planning

To develop a budget, you should track everything on which you and your spouse spend money for one week. This provides you with valuable information about exactly where your money is going, which is necessary in order to know where you can cut back in your budget. Based on your estimations, work together to create a workable, realistic budget to keep your finances under control.

To ensure that bills are being paid and to eliminate confusion, you and your spouse should designate one person to be the “bill payer”. This does not mean, of course, that the other should be left in the dark. Remember – communication!

Even if your finances appear solid in the short-run, you always should try to invest in an emergency fund. Your finances might be debt-free right now, but an unexpected situation for which you are unprepared could be very damaging. Understandably so, it can be very difficult to set aside money for a hypothetical situation, but its importance really cannot be overstated.

Dealing with Debt in a Marriage

Debt brought into a marriage is the largest source of conflict for the recently married, and finances consistently are one of the most common reasons for disagreement between spouses. In other words, it is crucial for you and your partner to responsibly handle debt together so that it does not get out of hand.

Debt in a marriage may have been incurred either before the marriage or afterward, but in any case it becomes the responsibility of both partners in many ways. For example, even if you both agree that payment on the debt will come out of your partner’s earnings, those payments still will lower your combined family income. Your spouse’s status as a debtor may affect you in other ways too.

If you or your spouse has poor credit, for example, then both of you may be turned down for a mortgage or other loan. Even though you each have your own credit reports, both reports will be pulled to determine eligibility for joint loans.

Collections

If your spouse’s debt is defaulted and transferred to collections, then he or she will not be the only one who could be affected. Even if the debt was incurred without your consent or knowledge, you probably will have to face collectors’ attempts to get payment from you. Additionally, if a creditor gets a judgment against your spouse for payment, then your joint assets could be seized as payment.

Even in the unfortunate case that a marriage should end, both spouses still may be held responsible for the debt incurred by one. This is particularly true if the debt was used to fund goods or services for the family.


Bankruptcy

If a couple files bankruptcy jointly, then the outcome obviously will affect both spouses’ finances and credit. If only one spouse files, however, then the effect on the other spouse depends on a number of different factors, not the least of which is state law.

In a chapter 7 bankruptcy filing, for example, the filer’s personal property is liquidated and sold for repayment of some debts. Community property, or property that belongs to both of you, may be liquidated in this situation. Even if you have nothing to do with the debts in question, your real estate, earnings, and other tangible assets could be affected.

Taking Action

There are a number of different courses of action that you and your spouse can take to relieve yourselves of debt before such drastic measures need be taken. You may want to consider:

• Working with a credit counselor to come up with a financial plan.

• Enrolling with a debt management company to settle your or your spouse’s debt.

• Obtaining a debt consolidation loan to simplify your finances and lower monthly payments.

• Obtaining a second mortgage or mortgage refinance to free up money to pay off debts.

Conclusions

Debt can be a source of much frustration within a marriage, but it does not have to be. So long as both partners are involved in their finances, are open and honest with one another about their financial histories, and are working together to plan for their futures, then debt can be avoided and/or managed efficiently.