The Advantage Advisor

Volume 3 / Issue 7/ 2008
This Issue:
Get better gas mileage
What to know when co-signing a loan
Sharing a living space and finances

We want your feedback

Share your thoughts on Advantage CCS and its services. Also, what kind of information would you like to see in upcoming editions of the Advisor?

You can make comments or suggestions by writing to Kristen Garrett, Advantage CCS, 2403 Sidney St., Suite 400, Pittsburgh, PA 15203 or by sending e-mail to kgarrett@advantageccs.org.

Dealing with the finances of divorce

It’s estimated that 40 percent of all marriages will end in divorce. Besides the emotional toll it takes on a couple, divorce has financial implications as well. There are things divorcing couples need to take into consideration when it comes to dissolving their finances and their marriage.

Over the course of a marriage, most couples accumulate assets and property together, and these things are usually the most difficult to divide. In certain states (AZ, CA, ID, LA, NE, NM, WA, AND WI) all shared property is divided in half. In most other states property is divided based on equitable distribution, but that doesn’t necessarily mean property is divided equally. The court will instead take other factors into consideration when dividing property.

Most married couples also accumulate debt together and resolving unpaid debts is an important decision in a divorce. You need to remember if you each agree to pay off certain things, your credit will be affected on joint accounts that your spouse pays late or doesn’t pay at all. Experts say if you can, pay off all debts so you don’t have to worry about your ex shirking his or her responsibility.

Experts also advise you to get your credit report, close all joint accounts and open new accounts in your own name before your divorce is final. It can take a long time for a divorce to be finalized. Closing joint accounts protects you from your spouse incurring new debt on joint accounts — debt that you would still be responsible for.

It’s also easier to open new accounts in your own name before a divorce is final. This is especially important for a woman who has never had credit in her name only. A woman, without a credit history of her own, is more likely to be approved for credit while she still shares joint assets with her husband.

It’s also important to evaluate your income and expenses as a single person. Advantage CCS certified counselors could help you set up a budget and evaluate your spending.

Dear Debt Monkey

Q: A friend asked me to co-sign a loan. What does this entail? What are my responsibilities?

A: The co-signer of a loan is someone who agrees to repay the loan should the primary debtor cease making payments. A creditor can hold a co-signer responsible for not only the regular balance, but also any late fees, collection costs, or other penalties that may accrue on an account. Unless a co-signer gets an exception in writing, creditors can request that he or she make payments on an account even before the primary debtor goes into default.

Prospective co-signers should be aware that any missed payments on the account will show up on their credit report. A creditor has the right to take legal action to obtain payment from a co-signer; such actions include but are not limited to the filing of a judgment, a forced disclosure of assets, or a mandated sale of property.
Before co-signing for a loan, consider contacting your state attorney general to obtain information about co-signer’s rights in your state. Carefully read any agreement and wait to sign it until any unclear terms are explained. Do not sign the loan if you are unwilling to abide by any of its terms; some creditors may be willing to remove or alter terms in order to obtain the signature of a co-borrower.

Tips to get better gas mileage

With gas prices continually rising, try to increase your car’s fuel efficiency. Here are some tips to help you make the most of every gallon of gas:

• Drive sensibly. Aggressive driving habits such as speeding, rapid acceleration and braking can lower your gas mileage anywhere from 5 to 33 percent.
• Slow down! Each 5 mph you drive over 60 mph is like paying an extra $0.20 per gallon of gas.
• Don’t carry around stuff you don’t need. Excess weight reduces fuel consumption.
• Try to avoid excessive idling. You’re burning gas and get 0 miles per gallon.
• Keep your car well tuned. Make sure your tire pressure is good, your air filters are clean, and your car is in general good repair.

Information: www.fueleconomy.gov

Living together: The financial responsibilities

Marriage has inherent legal and financial protections afforded to those who are willing and able to commit to a life together. Should the relationship end, there are expectations and procedures to follow. Divorce can be messy, but sorting out the financial affairs of a non-married couple can be a downright disaster. And if a partner dies, you may find yourself with very little rights. Although it’s something that may not be a pleasant topic to discuss at the beginning of your life together, it is extremely important.

The best way to protect yourself is to establish a cohabitation agreement. This legal document explicitly details the contributions and expectations of each party involved. It is best to talk with an attorney regarding this, but you can also download sample forms online.

In the absence of a cohabitation agreement, you should still avoid certain practices to limit your liability and protect yourself. You should never contribute money to the purchase of an asset such as a home or vehicle without including your name as part owner. If you are listed as joint owners, the entire property will come to you in the event of your partner’s death. As tenants-in-common, the property goes to your partner’s estate. Make sure you each have a legal will covering your inheritances.

It is also important to remain financially independent. Without the protection of court-ordered alimony or child support, you could end up alone and without income to support yourself. If your partner encourages you to quit working on the premise that he or she will support you, make sure you legally document the agreement.
Since you share all the living expenses, it may seem logical to open a joint checking account. However, it is best

to maintain separate accounts and each have certain bills that you pay.
If you still want a shared account, limit its use to communal expenses. Contribute money to the account equally or proportionately according to your respective salaries. Credit cards should be kept separate.

If you are friends sharing a home, delineate house ground rules. Before conflict starts, decide who is responsible for the house chores or how they are split. Determine how groceries will be shared. If you are a private person, make it known that you expect a certain amount of alone time. If you have signed a rental agreement, make sure you know your responsibilities should one person move out. Try to think of all possible situations, even if they seem outlandish at the time. For instance, what if a house mate invites his girlfriend to live with you as well? What happens when one of you wants to sell their share? Having a plan in advance is the best way to quickly and easily resolve tough situations.

For couples, you should always be clear on the expectations of your arrangement. Is living together a step on the way to marriage for you? Or are you merely staying together out of convenience? Referring to one another as husband and wife can be cause for awarding “palimony” (property sharing and support) if the relationship dissolves. Also, be aware of the myth of common-law marriage. Most states do not have laws recognizing it. If they do, there can be extensive conditions that must be met.

While many of these same rules apply, same-sex couples have a unique challenge. Even if you are married in a state or country that has legalized gay marriage, if you move to a state that doesn’t recognize it, you may still face some major legal hurdles.

The best course of action is to acquire an attorney and fill out all the required paperwork to give you as many of the rights of married heterosexual couples as possible.

You may also want to consider granting each other power of attorney so that you can make any health care decisions if necessary.

* This article is for informational purposes only and is not intended as substitute for legal advice.

The Advantage Challenge

ACCS is challenging you to ...

Reduce your gasoline usage by a specified amount each month.

Being more conscious of the way you drive can significantly reduce your gas intake. Simple actions such as driving sensibly and removing excess weight from your car can save up to 33 percent of your fuel costs!

Figure out how much potential savings you have each month by modifying your driving habits and keeping your car well-maintained. Then set a goal either in the amount of dollars you think you can save or in the amount of gallons of gasoline you can save for the month.

Then you can drive away knowing you have not only helped your pocketbook, but the environment as well.

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