Bankruptcy tends to save marriage jobs credit and cosigners. However, debt hurts these relationships. So, if you want to learn more about how bankruptcy affects spouse, job, credit, and cosigners. If you want to know how bankruptcy can save a marriage, protect a spouse or cosigner, prevent a job loss, and restore credit, it is in the last paragraph. But the effects of debt are important to know first. If you ever wondered what the effect of debt is we can tell you.
How Bankruptcy Affects Your Spouse, Job, Credit, and Cosigners
For the average $45,000 wage earner just a $10,000 increase in debt makes your marriage suffer, you are about 25% more likely to divorce, and the quality of your marriage declines. First, your ability to earn a decent wage, obtain a home and other wealth indicators suffer. Next, society suffers because you are far less likely to share and give to others. In fact, your overall happiness suffers.
All debt is bad in its effects on your personal wealth and the family. Interestingly, student loans have the least effect on a marriage. Of course, it is the debt least likely to garnish your wages or attach a home. In addition, student loans normally have the lowest interest rates. So, student loans are the form of debt that at least threatens the family and is most likely to increase income. But, even student loans, which are the least destructive type of debt, harms you and your family. This is something you need to know, so, I invite you to continue reading to learn the facts.
⎆ Debt makes your marriage suffer while bankruptcy relieves stress.
For many people, bankruptcy is a breath of fresh air that eliminates the stress brought on by debt. Unfortunately, debt brings with it major consequences for marriages, jobs, personal wealth, credit, and cosigners. In fact, the worse the debt, the more strain on the marriage. It’s also more likely a spouse divorces you whether or not the debt is your fault. Plus, statistics show that even if the debt is for a good purpose—if you are in debt you are more likely to divorce.
Dora Gicheva at the University of North Carolina at Greensboro did a study that shows even a small student debt dramatically increases the long-term probability of a marriage ending in divorce and decreases the likelihood that anyone marries you. Gicheva’s study shows that just an additional $10,000 in loans decreases the probability of marriage by at least seven percentage points.
Also, going from owing student loans from $0 to $10,000increases your chance of divorce from about 47% to about 54%. This is a 15% increase in divorce over a $100 dollar a month debt that does not get paid in 40% of American homes. Therefore, the stress alone increases the number of divorces whether or not someone pays it. If you take on even more debt, your chance of divorce becomes a guarantee.
⎆ Student debt affects your ability to purchase a home or car.
“Households headed by a young, college-educated adult without any student debt obligations have seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700).” —Richard Fry, Pew
Students who take out loans are less satisfied with their financial situation compared to people without loans. Additionally, the Federal Reserve Bank of St. Louis finds the same results. The Federal Reserve Bank of New York in another study also finds that young student debtors cannot or will not purchase homes and cars.
⎆ Debt makes a less charitable society.
If you put people into debt charities and society suffer. People can’t afford to give to others or feel that can’t afford it. They simply become less charitable. A famous study on student debt by Jesse Rothstein of the University of California, Berkeley, and Cecilia Elena Rouse of Princeton looked at the result of replacing loans with grants. It found “debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs.”
⎆ Bankruptcy is a financial tool, not a behavior.
When people get old their bones develop osteoporosis. Their hips often shatter and then the person falls. The person that suffers from this type of injury thinks that they fell and then broke the hip. But it does not happen in that order. Instead, the hip breaks creating the fall. People often claim they lost their homes due to bankruptcy. This is almost always a lie. They lost the home because they could not or would not pay the mortgage (debt). I have never seen or heard of a person losing their home because of bankruptcy and I have practiced bankruptcy cases for over 25 years in thousands of cases. Often the bankruptcy allows the homeowner the ability to catch the mortgage up and save the home or modify the mortgage making it more affordable. When a homeowner loses a home what happens is they have often lost a job or now refuse to pay because the mortgage is more than the value of the home.
Bankruptcy destroys debt. It is like using surgery or nuclear medicine against cancer. It quickly destroys the debt and removes the effects of debt. The problem with bankruptcy is that it cannot remove the cause of the disease. Debt and poverty are a mental habit of spending. Debt and poverty are caused by people spending first, then paying bills, and investing and saving last. The disease or cancer will return as long as anyone lives that lifestyle. Read the Millionaire mind to discover how common everyday people like teachers and bus drivers retire wealthy due to proper mental programming and attitudes towards budgeting. Or listen to Dave Ramsey.
⎆ An example of how bankruptcy affects spouse, job, credit, and cosigners.
An interesting story is from Dave Ramsey about his horrible bankruptcy experience. He lost several homes and a business. Much of the problem he went through was because of a change in the management of a bank when a new manager called his notes due. But, bankruptcy was not the cause of his business failure.
It is worth noting, however, that some attorneys are better with the bankruptcy tool than others. While some attorneys are real masters, others are less masterful. However, in filing thousands of cases, I don’t know of even one bankruptcy that caused the problems that lead to divorce and poverty.
That’s because debt causes problems. So, if poor financial habits cause the problem I recommend Dave Ramsey to help you reprogram the viruses of the mind that cause poverty and debt dependency.
Additionally, there is also a bankruptcy section that prevents job discrimination with present employers but not future employers. Also, Chapter 13 plans can protect cosigners and spouses. Then, you rebuild credit by paying on time after the discharge in bankruptcy. After that, within six months to one year, you should be able to buy a car and a new home within two years. Moreover, your marriage can be happy again. But please don’t blame the kitchen knife for the murder. Instead, always remember, debt causes problems while bankruptcy cures the problems.
To use a metaphor: If you have a stomach virus don’t blame the Pepto Bismol you took to cure the bellyache.
Resources for Bankruptcy
Louisville Kentucky Bankruptcy Forms
Other Related Information
Louisville Kentucky Bankruptcy Divorce
Bankruptcy Adversary Proceedings: Chapter 7 and 13
Self-Help Resources for Rebuilding Your Life After Bankruptcy
If you are thinking about filing bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office right away to start the conversation. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905
