“Dear Steve,

Thank you for providing such a valuable service during these difficult economic times.

I am getting married in the spring of 2010. We have been discussing each other’s finances and unfortunately she will be bringing with her a mountain of debt. She is 50yo, Gross income is $120k, $45k of credit card debt, a condo that is valued at $100k that she owes $145k on, No savings, $60k in retirement adding $0k/yr. I am 47yo, Earn $85k gross, have a condo @ $225k/30yr @ 5.0%, $55k savings, $125k Retirement adding $15k/yr and a 50% Pension. From what I read she earns too much to declare bankruptcy, would it be wise for her to let the bank take her condo and tackling the $45k in credit cards with my savings?

Thx >

Sammy”

The Answer

Dear Sammy,

Savers attract spenders. It’s the old opposites attract thing.

Purely from a practical point of view I think the best thing to do is tidy this mess up before you are joined in wedded bliss.

It sounds like you are not going to keep her condo anyway after you get married and selling it really isn’t an option. Also, she’s maturing and currently not saving any money towards retirement.

While some others might chastise her for considering bankruptcy, just purely from that practical point of view I mentioned, I don’t think it is entirely unreasonable.

Let’s look at it like this. Let’s say she hands the condo back and then enters a Chapter 13 bankruptcy for the next three years. It would be best to do that now before you are married. At the end of three years she’ll be totally debt free and you’ll have a clean slate to start from. You can help her to be responsible and start saving.

I admit that sometimes I can be a bit cynical but I think if you simply bail her out with your savings you are sending the wrong message. You don’t want to sacrifice your good savings by investing to try to address her bad behavior. Besides, I think a dose of pain will help her to wake up and get back on track.

Let’s not forget that it’s not going to be just $45,000 of credit card debt. The bank is also going to come after her for $50,000 or so for the deficiency from taking the house back. Do you plan on sacrificing more of your savings for that as well?

I think the two of you should find a local bankruptcy attorney you like and go in and discuss this matter together. Then go home, mull it over, and see if it makes sense to the both of you. If you want to make an investment to bail her out, pay for her bankruptcy.

Bottom line, this is her financial cesspool and it should be her responsibility to clean it up without dragging you in. That’s just not fair.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Big Hug!

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