Unraveling finances after a breakup can get messy, especially if debt is involved. I called Rachel, who lives in Kansas City Symbolic offer To explain how her breakup left her facing the prospect of bankruptcy.
However, during the episode, Ramsay was quick to dismiss the move: “It’s like taking poison and hoping he dies,” he says.
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He believes Rachel is a “case study” in why people should never “buy a house with people they’re not married to.” this is the reason.
Resolving joint debt can be messy after a breakup
Rachel’s relationship with her fiancé goes back five years Ramsey said. During that period, they managed to accumulate significant debt. They have at least five types of loans, ranging from a $90,000 mortgage, to $50,000 in combined debt on a car and truck they own together. The couple has another $8,000 in combined loans. However, they do not have any joint bank accounts.
The decision to buy a house with friends or long-term partners is Increasingly common. Rising housing prices combined with a shortage of affordable homes and stagnant wages have pushed more people into co-ownership. Nearly 26.7% of all home purchases in the United States were completed by participating buyers this year. According to the participation in the purchasea company that facilitates such transactions.
Rachel told Ramsey that their relationship broke down months ago, and that’s when she consulted a bankruptcy attorney to see how they could resolve their shared debts. The attorney recommended filing for bankruptcy. Ramsay isn’t convinced this is the best way forward. “Asking a bankruptcy lawyer if you’re broke is like asking a dog if it’s hungry,” he says.
Filing for bankruptcy as a married couple is complicated enough. It can be more complicated for unmarried couples who co-sign the loans. However, it appears that Rachel and her ex-husband have enough assets to mitigate the situation without filing for bankruptcy.
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Selling assets is the preferred alternative to bankruptcy
Ramsey recommends a mutual agreement that will break up the couple’s assets and leave Rachel and her ex in a better financial position. At the top of the list? Sell the house. Rachel estimates the house is worth $130,000, while the outstanding mortgage is $90,000. This means they can sell the home and split the proceeds.
Likewise, the car and truck sale would be Eliminate the burden of debt additional. Doing so would leave the couple with only a few thousand in loans that could be easily repaid—without having to file for bankruptcy.
Selling assets to pay off debts instead of filing for bankruptcy may be a good idea in certain situations. The average American household’s net worth is $1.06 million, according to the latest Federal Reserve data Consumer Finance Survey. Meanwhile, the average net debt per person is about $59,580, according to data from the Federal Reserve Bank of New York Household Debt and Credit.
This means that selling real estate, vehicles, or even stocks can help most Americans mitigate the impact of debt and high interest rates. This might be the best solution for Rachel and her ex as well, provided they reach a mutual agreement.
If they can’t, Ramsey suggests that Rachel sue her ex-husband to break up the partnership. To be fair, Ramsay is a financial expert, not an attorney, so Rachel may need to reach out to another expert — especially since most states have different laws regarding dissolving a domestic partnership.
The process can be complicated, which is why Ramsay (and many financial experts) recommend separating debts and assets unless absolutely necessary.
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This article provides information only and should not be construed as advice. They are provided without warranty of any kind.
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