Debt is far more prevalent than you might think. A staggering 13% of Americans anticipate being in debt for the entirety of their lives. But does this suggest that debt is inevitable?
Not quite. While the total American debt has reached around $14 trillion—a figure that’s hard to comprehend—this quantity represents a serious financial issue. To visualize this, consider that a trillion is a one followed by 12 zeros, which is equivalent to the cost of purchasing 37 million average family homes.
However, debt can often be a temporary hurdle in your financial journey if you create a budget and prioritize your repayments. For example, student loans are intended to generate initial debt, which can be managed and repaid through sound financial practices. Furthermore, with 19% of Americans lacking emergency savings, unforeseen expenses like home repairs can quickly disrupt your finances.
Additionally, medical costs are rising faster than wages, meaning unexpected injuries at work could lead to significant financial strain if you lack legal protection.
Importantly, in many situations, the debt may not be solely your responsibility, and there are ways to either walk away from it or substantially decrease it.
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Community Property Debts During Separation
Many couples are unaware that debts incurred during marriage can be split between both parties in the event of a divorce. Community debts are typically divided equally, which can be facilitated by a determined lawyer advocating for your rights. Community property laws apply in states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, with some states giving couples the option to agree on community property.
In summary: You might not have to shoulder your debt alone.
If You Don’t Live in a Community Property State
As mentioned, there are nine community property states in the U.S., plus three (Alaska, South Dakota, and Tennessee) where community property laws apply to divorce debt.
If you reside in any other state and your spouse accumulates debt during the marriage, which they attempt to assign to you during separation, you have the right to contest this. Having a legal advisor is beneficial to ensure that debts unrelated to joint marital assets remain separate.
Caution: Joint credit card debts and co-signed accounts will still impact you. You can remove yourself from a co-signed credit account if your spouse is capable of maintaining the account independently at the time of or before the divorce, thus freeing you from responsibility for their debts.
Insufficient Medical Insurance Coverage
It’s essential to compare insurance plans and consider switching to a different provider to ensure you receive the necessary support. Some insurers might not offer the coverage you need for your health, leading to higher medical costs. For instance, if you have diabetes, researching insurance plans that provide optimal coverage at affordable premiums could make a significant difference in your medical debt.
In conclusion, understanding the roots of debt and knowing how to mitigate or eliminate it can be crucial for effective financial management. Remember: you are not always liable for every debt, and you may not need to bear the full brunt of it every time!
