Divorce. That's kinda interesting, but makes sense. I don't know enough about the law, but I'd bet shared debt is a problem when divorce happens.
Shared debt and the fact that one spouse usually has a dramatic drop in income while the other spouse has new liabilities (child support + paying for another (separate) residence, etc.).
Divorce is an obvious cause of financial problems (all financial problems need not lead to bankruptcy, however. It may be better to have a judgment against you than to file bankruptcy, especially if you have fewer assets than your judgment exemptions cover). When two people who were living together as husband and wife separate, two homes are required. It is never as cheap to live separately. Child support usually works for one parent and against the other. Legal bills can be substantial, and the quick sale of property results in lost equity. This is completely predictable, but few bother to think even a little bit ahead.
Please explain the link between divorce and bankruptcy?
Shared debt was not a problem in my divorce. /sarc
Money matters were a major reason for leaving my ex ... she was bankrupting me while we were married.
When I left I was paying all the bills, and they were all getting paid on time. My ex and kids got enough for living expenses.
The judge did not like that arrangement, and gave most of my assets to my ex, along with 70% of my net income (I was imputed to make more than I did). This may make it sound like I was low income, but I was not. She was getting $4500/mo in after tax income.
The only debts she got were mortgage and utilities.
The judge assigned all the revolving debt to me.
The judge ordered me not to pay it, because it was not as important as paying alimony. When I did pay it anyways, I got chewed out by the judge because I reduced the value of my estate, which reduced what could be taken from me and given to my ex.
My ex used the cards while seperated to pay for everything, including her attorney, then demanded I pay her legal costs (this was an interesting attempt at a double dip that failed)
In the final decree, I got the judge to assign one of the cards to her for repayment, and had it so stated under the court order. The credit card company refused to take my name off the account or release me from liability.
She got another credit card while seperated that she maxed out and defaulted on. I occasionally get calls from them but clearly have no liability since I never signed onto the card and am protected because it was obtained after seperation and filing.
Since she got the house, and I got a fixed amount of the value, I placed 2 liens on the house. One for my amount, the other for the credit card. She was losing the house to foreclosure, and the only thing that saved me from the credit card companies was that lien. I paid off that card - which was really doing her a favor, but I did it to prevent the credit card companies from coming after me.
The kids left her 3 years ago and moved in with me. Alimony ended 2 years ago. She is now re-divorced (hubby 2) and living off a boyfriend.
My credit is now getting back close to what it was ... around 670 when it used to be 730, after 5 years of hard work. At the low point of the divorce I was around 530 because of all the bills she was defaulting on.
The winners in all this were the lawyers, who combined pocketed $60K in legal fees ... and of course the credit card companies, who got thier money too.
The losers were me (who ultimately paid those fees and alimony and did so by liquidating almost all assets), my ex (who would have been better off with some court ordered financial counselling to go along with the FCS counselling that was required), and my kids (who lost thier college funds and inheritances in addition to thier parents splitting).