Don’t Let Hidden Debt Destroy a Relationship

Do you wait several dates before asking your potential life-time partner if they’ve racked up student loans or other significant loans? Do you pop the debt question the day before moving into the first apartment you’ll share together? The issue of communicating about debt is tricky for young adults (and anyone for that matter). It’s just as complicated for people who are embarking on second marriages carrying mortgages and tuition obligations for their children. Why is it important that you ask about debt?

Most people have loans.

If this is your situation, you’re not alone. It’s difficult to obtain a college degree without thousands of dollars of loans.

Counselors point out that people have a moral obligation to disclose indebtedness, but say timing depends on the nature of the relationship. How serious are you? Are you picking out engagement rings? The indebted partner must recognize that their obligation will profoundly affect every financial decision the couple will make in their marriage.

Check your state’s matrimonial laws.

Find out whether both partners are responsible for paying off the loan of a large debt acquired while both parties were single. In most states, the partner who assumes student loan debt before the marriage likely will remain solely liable.

If one of you discloses significant debt and both parties decide to go forward with the relationship, make every effort to prepare a joint household budget that’s fair to both. It’s key to avoid resentments and manage finances so that the debt-free partner does not make all the sacrifices. It’s also important to look ahead and consider the unforeseen. What will you do if one person gets sick and can’t work? If you decide to have children, will one of you provide full-time childcare? Or will that partner continue to work full time?

Who is responsible for debt and assets if the marriage ends in divorce? Laws vary from state to state, so you’ll want to know what’s required where you live. In New York, for instance, the state treats the earning power of an advanced degree completed during the marriage as an asset to be divided.

Ask questions. Put agreements in writing.

If the student borrower plans to take sole responsibility for paying off their debt, it’s a good idea to put it in writing. Even if the laws in your state are clear, it helps to clear up uncertainty between you and your partner. It’s an important step, even if you are just moving in together. Written agreements are even more critical if you’re entering a second marriage complicated with assets and mortgages.

Don’t put it off till the wedding day.

Some couples don’t seem to get around to having the pre-marriage money discussion. Pre-marital lawyers involved in negotiating pre-nuptial agreements say about half the time, partners give very different answers to money questions and they’re shocked to discover the other person’s perspective. Don’t wait until it’s too late to ask the important.

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