Credit Card Debt Causing Divorce?

    First came the mortgage crisis, then the banking crisis and now experts are predicting a credit card crisis is in the making. That crisis could push some couples over the financial edge. And the combination of financial pressures, job loss or high credit card debt may well make for a perfect storm when it comes to a couple’s uncoupling potential. 

“This economic crisis is going to hurt everyone, even the well to do — especially those living on investment capital. As far the middle class: there will be no wiggle room financially anymore and the lower class may wind up on the streets. I do not believe anyone will go unscathed in this horrific economic crisis and marriages will suffer, whether a person is trying to make this marriage work or trying to survive a divorce,” said California attorney Stacy Phillips, author of the book "Divorce: It's All About Control How to Win the Emotional, Psychological and Legal Wars."

Phillips is among a growing number of financial and relationship experts from around the country who say they’re seeing more and more couples in financial trouble – and that can turn into emotional trouble and potential divorce in the making. “One or both are often more anxious and worried, which leads to more irritability and less tolerance. Couples are preoccupied and not as emotionally available to work on their issues," said Phyllis Goldberg, a California marriage and family therapist and co-founder of hermentercenter.com, a site that helps divorcing women.

Credit card debt is the “next crisis facing our country. We are in credit card debt in the billions and …there didn’t seem to be an end in sight,” said Andrew Bernstein, a certified credit counselor with the Florida-based debthelper.com. For a couple whose debt has mounted, whatever the reason “Many times the first reactions are fear and a sense of panic, particularly if the collection calls have started. That will be followed by the question, ‘What do we do now?’,” he said.

Credit card debt “produces increased tension on a couple, especially younger ones who have not had a lot of experience in this area,” he said. “Having been in the credit counseling industry for more than 10 years, observations would indicate that financial tensions are a huge factor in separation and divorce.”

Given the current economic crisis and its widening reach, “Those couples who do not know how to talk about money in a productive way will be much more stressed and resentful, which will increase the likelihood of divorce,” said Tina Tessina, a California psychotherapist and author of "Money, Sex and Kids: Stop Fighting about the Three Things that Can Ruin a Marriage."

“If one party is not honest with the other party, it can cause a rift,” Phillips said. “For instance, going into a store or restaurant and having your card declined can be a very humiliating experience. If your mate has this experience because he/she thought the credit card was under its limit and you ran it up without disclosing that information, the fur might fly.”    

In addition, “if your mate cancels the card and does not tell you, that embarrassment in the store that could have been avoided will undoubtedly cause significant problems in your relationship,” Phillips said.  

Finally, "...if you are outspending your income, and putting additional purchases on credit cards, that can take a real toll on the relationship,” Phillips said.
 
“Couples need to tackle these credit card issues head on during these upcoming tough economic times. If not, it could cost them what was once seemed to be a perfectly good marriage," she addedd.

Often, Bernstein said, the bill-paying spouse will get blamed for the credit card debt by the other spouse, who may not have known the couple’s financial picture. “…That will tend to lead to one blaming the other for not keeping up with things,” he said.

If one spouse loses a job or a medical issue arises that causes debt to mount, the situation “can exacerbate other problems the couple might be having,” Bernstein said.

“If you've lost your job, you'll need to make an emergency plan, perhaps taking a job that's less than you want, or a second, weekend job to make up the difference. Drastic times call for drastic measures,” Tessina said.

Bernstein cautioned credit card users to pay attention to what they're spending: “What all consumers need to realize is that credit cards are not free money. Most cards are not interest-free, and there are several ways that the interest can increase that consumers are not necessarily aware of, such as when there are late payment- or over-the-limit penalties. Interest can increase dramatically. This can totally throw off a couple’s budget. For example, let’s take a couple that has four cards and are paying the minimum payments of $25. They have budgeted for $100 a month for their credit card bills. If they get a late fee, that would double on average, and if there is an over-the-limit fee, that would triple it. Now instead of $100 per month, there goes to $300 or more because of the increase in interest….”

“This is the time to sit down and talk about money in a serious fashion, and make a plan. If you've been living beyond your means, learn to budget and bring your spending under control. This isn't easy, but you'll feel better knowing the problem is being solved," Tessina suggested.

California financial advisor Ginita Wall, who lectures on the topic "What Women Need to Know about Divorce," said credit card defaults by couples “often lead to bankruptcy." 

And that can make divorce more difficult, experts say. New Jersey certified public accountant Noah Rosenfarb, who operates www.FreedomWealthAdvisors.com, said “One of the recently popular seminars for family attorneys is ‘Divorce or Bankruptcy: What should they file first? This is a hot topic among family attorneys, as most are worried about whether clients that want to get divorced can actually afford it. Aside from legal fees, many couples have to clean up their joint credit card debts, sell a house that may not be worth more than the mortgage, and then figure out how to afford to live in separate households when it was tough to pay the bills living together.”