How to Manage Household Debts During the Pandemic
As of October 2020, the unemployment rate in the United States was 7.9%, and the unemployment rate had been as high as 14.4% in May 2020 when the pandemic was at its spring peak. Although eviction moratoriums and other protections have been put in place to help the unemployed, they can’t guarantee that you’ll enjoy financial security now or in the future.
What Happens If a Joint Debt Isn’t Paid as Agreed?
If your name is on an account that is more than 30 days past due, your credit score could fall by anywhere from 60 to 150 points. Furthermore, you may be subject to a barrage of phone calls, letters, or other attempts to collect the past due balance. This may be true even if your estranged or former partner is required to pay off a joint debt per the terms of a separation or divorce agreement.
Typically, your lender is only bound by the terms of the documents that were signed prior to receiving a loan. Ideally, a divorce decree will allow you to transfer debts that your spouse is required to pay to an account in that person’s name only.
In the event that a debt is secured by collateral, you risk losing that collateral unless an effort is made to get current on the loan. For instance, a lender could repossess a family car or foreclose on a family home if payments are not made in a timely manner.
Try to Avoid Using Retirement Funds to Repay Marital Debts
It may be tempting to use retirement savings to pay a joint credit card balance or make a mortgage payment. However, it is worth noting that money that sits inside of an IRA or 401(k) is typically exempt from being seized by creditors or by state or government tax authorities. It is also worth noting that your retirement accounts are generally seen as joint assets even if your name is the only one on them.
Therefore, making a withdrawal prior to filing for a divorce may be used against you during settlement talks or during a divorce trial. This may be true even if the money was used for what you perceived to be a legitimate purpose. A divorce lawyer may be able to provide more insight into what might happen to marital assets just before, during, and after a marriage ends.
Get in Touch With Your Lenders Immediately
In most cases, your lenders will work with you to make it easier to stay current on a loan during a period of economic distress. For example, you may be entitled to a student loan, car, or mortgage forbearance, which might make it possible to skip or postpone one or more monthly payments. If you have positive equity in a car, home, or other assets, it may be worth selling it and using the proceeds to buy food or take care of other necessities.
In some cases, alleviating your financial stress may alleviate issues in your marriage that might have put it on the brink of failure. For instance, getting mortgage forbearance may mean that you don’t have to move your child out of a quality school district or move from a home into a cramped apartment. It might also mean that your spouse doesn’t need to get a job outside of the house that could negatively impact his or her health.
However, if you feel as if your marriage is likely going to come to an end in the near future, it may be in your best interest to speak with a divorce lawyer. He or she might provide more insight into how joint assets and debts are typically divided in a divorce proceeding.
If you are in need of divorce legal services in Jenkintown, contact the Law Office of Joanne Kleiner today by calling 215-886-1266 or by sending a fax to 215-886-2670.