03 Feb Does Bankruptcy Cause Divorce?
Does bankruptcy cause divorce? No. However the underlying factors that led to the bankruptcy may cause you to consider divorce. My office manager and I were recently discussing this factor because so many of our clients lately have filed for divorce. In fact so many of our clients have filed for divorce that we wanted to stop and analyze what is going on when people file for bankruptcy.
The first conclusion we came to is that people are so far in debt that they are not making their regular payments. Sounds easy enough but I think it is actually complex. The thought the debtors have is if they could just get rid of the credit card debt than everything would be okay. However many people have no clue how they got in debt and where they are spending their money. This is the first sign that people maybe headed for divorce because they don’t communicate about their finances.
We file the bankruptcy and stop the creditors from harassing the debtors. The debtors are happy and think that everything is great now. The communication about finances still have not begun between the debtors and now we are entering month three post-petition. The debtors begin to argue even more fiercely about where is the money going because the credit card debt is now gone but now they feel like they are in worst shape than they were before. At this point I get two phone calls. The first is that they want to get out of bankruptcy and the second is they want to file for divorce because they blame each other for the current situation.
Our theory about what is happening to our clients post-petition is as follows. Pre-petition the debtors are living on credit cards to eat out, put gas in the tank and to pay utilities. The debtors are paying the credit card debt so they can continue to use the credit cards to live but they are not making the house payment, car payment any other secured debt payments. Bottom line there is no money present. Communication is nonexistent and stress is at an all time high.
Post-petition the credit card debt is gone and now the debtors are making the plan payment, making the house payment(s), making utility payments and everyday living expenses on time. The lifestyle of going out to eat, movies and extra trips to the malls because “I deserve it” continues along with no communication about finances. So now the stress increases even more. The debtors continue to be puzzled as to why they cannot continue to live in the fast lane without an increase in income.
The only way that bankruptcy is going to work is if you analyze the underlying cause of why you are in debt. Did you spend more than you make, did you have high medical debt or was there some other catastrophe that was out of your control and forced you into bankruptcy? It is only when you identify the cause of your debt that you will begin to make changes to become financially healthy.
If you are married and than the both of you must sit down and communicate about the debt. You may no longer be able to go out to diner 3-5 times a week. You may no longer be able to buy what you want when you want it. You may not be able to spend $500-$700 a child for either Christmas or birthdays. If you don’t communicate about the debt and your spending habits than bankruptcy can possibly lead you down the road to divorce.
In the above situation do I believe that my couples would have divorced if they never filed bankruptcy. Yes, the filing of the bankruptcy just shed light on the underlying conditions of non-communication and poor financial decisions. What can you do to weather this storm?
Communicate, communicate, communicate. You must sit down and talk to your spouse about your finances. Seek help through your church or other professionals in learning how to communicate with each other. Learn about healthy financial habits by either taking course at the junior college or taking a course such as the course offered by Dave Ramsey.
Some of you reading this will say I can’t believe you recommend Dave Ramsey. The general feeling is that Dave Ramsey is against bankruptcy. On Dave’s website and through conversations with his staff, Dave recommends what the rest of the attorneys on this website recommend, use bankruptcy only if necessary.
Whether it is Dave Ramsey, myself or any other attorney who practices bankruptcy will tell you, you must take control of your budget. You must know where every penny is spent. You must be able evaluate whether the money spent is because you needed to spend the money or because you spent on impulse. If you are married you MUST communicate with each other about your financial future.
If you are not willing to take these steps than as Dave says, bankruptcy will only be a quick fix and you may be in the same boat again in the future. Bankruptcy allowed Walt Disney, Donald Trump, Larry King and Dave Ramsey to close the door on their previous poor financial decisions and allowed them to achieve the financial success that they have today.
In the end it is truly up to you as to whether or not your bankruptcy is going to open the door of opportunity to a brighter financial future or just be a quick fix doomed to lead you back down the road of financial despair.
Take control today so you can have a brighter financial future tomorrow!
Written by Rachel Lynn Foley.