As part of National Public Radio’s morning edition report for April 29, 2019, business correspondent Yuki Noguchi reported on a phenomenon we have witnessed, financial infidelity. Ours is an age where credit is available everywhere 24/7. Want to buy a power washer at 3 a.m.? Your friends at Amazon are not only prepared to take the order, they are also happy to discount the product if you will take a Chase Amazon Prime card as part of the transaction. If you watch CNN, an advertisement runs where a sales team realizes that it doesn’t have the financial resources to fill a new customer’s massive order for their product. Instantly, an online banker appears and suggests the needed cash can be available in hours.
According to I Corinthians, we are tempted in the same way that everyone else is tempted. But, God can be trusted not to let us be tempted too much, and he will show us how to escape from temptation. According to the New York Federal Reserve, the temptation appears to be winning as consumer debt grew from 3.25 trillion in 2012 to almost 4.25 trillion in 2017.
What Noguchi was reporting upon was the fact that if you are married, your debt may be increasing without your knowing it. A recent study indicates that within families 25-40% of adults are not being candid with their spouse about the debt they carry. What made the story all the more poignant was that it told the story of a family where this occurred. The husband had incurred some debt to make a career change to become a financial counselor. When he opened his new practice, it did not instantly generate the revenue he expected and consumer credit became a convenient crutch. As one might expect, a person who counsels people about money management would be embarrassed to reveal to his spouse that he was struggling with his own credit issues. Ultimately, he confessed and it appears the couple worked things out, although the wife acknowledged that she was angry about the entire situation.
So suppose you were the “victim” in this situation. Your spouse the “motor head” tells you that a classic car is going to auction. He is certain that if he can buy it for $20,000, he can restore it and sell it for twice that amount. While looking at the three other cars in the driveway you tell him he is crazy and that this investment and related debt service is nowhere in the family budget. But, despite your protests, he independently borrows the money or taps your home equity line of credit to buy the car. He gets his best friend to provide the garage space so you don’t even see the car.
Time goes on and for whatever reason the marriage starts to unravel. Someone files for divorce and when husband provides his disclosures, you see $20,000 of consumer debt you did not know about is now $28,000 because he never made more than the minimum payment and there is $6,000 due to Chase/Amazon on his separate card for the crap he bought trying to fix the car. His friendly neighbor is also saying that he wants $700 for the 10 months the car was “hidden/stored” in his garage while your husband was “restoring” it. The restoration never was completed, so you have a half pulled apart car you did not know about and $35,000 worth of related debt.
The law is going to protect you here, right? Well, maybe but maybe not. Marital debt is any debt incurred by either spouse during the marriage to the date of separation. It doesn’t say “known debt or disclosed debt”. A judge or hearing officer may be sympathetic, especially if it is money spent on a boyfriend or girlfriend. Courts have the discretion to award assets and liabilities in different percentages including “The car debt is all his; the PANDORA Jewelry debt is all hers.” But the law is not firm on this subject. Even less persuasive is the situation Noguchi reported where unknown debt was used to maintain the family lifestyle. In that instance, wife will argue that she would not have taken the Disney vacation or had the house re-carpeted had she known that debt and not husband’s business was not the source of the money underwriting these projects. Many courts take a laissez faire approach. “You both went to Disney and you both walked on the rugs so you both will share the experience of paying for that debt.”
The moral is “Know thy spouse.” If you have doubts, perhaps you should demand an agreement that says neither of you will ask the other to contribute to debt that is not known and acknowledged in writing. You don’t want to be staring at $35,000 in car debt in a divorce proceeding only to listen to your spouse say, “She knew I wanted to get that car and fix it.” The truth is that you did know what he wanted; you just did not know that he did it. A good beginning is to agree every year during tax season to secure your free credit report and share it with your spouse. Reluctance to make that exchange is a sure sign that financial trouble is either underway or about to occur. A failed marriage is a sad but recoverable event. A failed marriage coupled with undisclosed and unmanaged debt burden is not.