Home Equity Credit

Freya’s Financial Facts Regarding Divorce

 West Coast Woman

Published November 2006

Close That Home Equity Line of Credit NOW!

Many couples fall into the trap that banks unintentionally set when they arrange a home equity line of credit on their new home at the time of purchase. It all sounds very logical: open the line of credit now so it is there if you need funds later for home improvement or other perfectly legitimate purposes. And of course you are happily married when you do this, happy to have a new home and all the excitement that goes with it.

Things go well and you in fact do not use the home equity line, it just sits there, not costing any money nor producing any reminder paperwork and pretty soon you forget about its’ existence. Your spouse however remembers that it is there. You have signed all paperwork and there are even checks put away somewhere.

One day your spouse, who is managing the money in the marriage, decides things are a little tight. So he or she begins writing checks against the home equity line. The checks do not require your new approval or notice to you that they are being written. The checks in effect represent a marital decision that you are making with your spouse to spend money that you are not even aware of.

Of course simultaneously your marriage begins to deteriorate. You spend the next two years in marriage counseling, while your spouse continues to spend down the home equity on your lifestyle, or maybe their secret lifestyle.

Finally, you file for divorce and in the financial documents of your spouse you see a massive debt against the house that you thought would provide equity to be divided, and instead you are dividing debt.

This scenario can be avoided by simply not agreeing to an open ended line of credit against your home. You can always go and get equity out of your home if necessary at a later date. American consumers who for years have treated their homes like ATM machines, are now having to face the music of having less equity in their homes and paying higher interest rates. This is particularly destructive in the case of divorce, when it is normal for both parties to have to reduce their lifestyle anyway.

You can always argue the case that the spouse was in fact dissipating marital assets and that you should not be liable for the debt. You might win that argument in a court room. The problem is that a) you are in a court room so it is a gamble and b) it costs time and money to do that. It remains more prudent to not get into that situation in the first place.

Along those same lines, in your marriage you should be aware of the financial situation your spouse is in, even if you keep separate checking accounts. If your spouse is running up credit card bills during a marriage, he or she could still argue that the debt is marital, and that by you not objecting to it was tacit approval to its existence.

Sit down with your spouse on a regular basis and establish the following:

  1. The total value of your assets.
  2. The total debt level and how much it costs each month to service that debt.
  3. The total borrowing power in existence, whether from open credit card accounts, home equity lines or other sources.
  4. Income levels from jobs and businesses owned.

None of this need be confrontational in nature and you should be willing to share information to create a transparent financial picture.

Obviously if I am writing this article it is because we have seen the scenarios described above all too often. Don’t be afraid to get the answers to your questions now before it is too late.

Feel free to call us if you this information causes you to question your own financial picture, whether you are thinking about divorce or not. We may be able to assist you in getting back on the right track, no matter what your situation is.

If you are headed for divorce then you will need expertise in helping you determine what your new financial picture will look like. We are happy to meet with you as a couple to assist you in an amicable divorce or as an individual if that works best for you.

Freya Robbins

Freya has been assisting families for years, combining professional training and her own experience in marriage, parenting and divorce; she truly relates to her clients. Freya founded Zollinger Mediation was in 2004, and she has been assisting families with divorce mediation, marital mediation, pre-nuptial and post-nuptial agreements and eldercare mediation since. Freya business is known as The Positive Alternative to adversarial divorce. She educates her clients and shares ideas in a straightforward but accepting way about how to resolve conflict. In addition to her mediation practice, Freya holds a Series 6 License and is licensed to sell Life and Health Insurance, Annuities, Mutual Funds and Retirement plans. She holds a Certification in Long Term Care (CLTC) and is certified as a Chartered Special Needs Consultant (ChSNC). She helps families with special needs as she has a son with Epilepsy. She also cared for both of her parents as they needed assistance with care and in preparation for passing. Freya has written articles for West Coast Woman Magazine, the Observer and has been volunteer speaker for the Women’s Resource Center of Sarasota County. Freya is an advocate for eliminating Childhood Sexual Abuse and serves on the Board of the Child Protection Center in Sarasota, FL. Freya raised her 2 children as a single parent while building her businesses. Freya serves on the board of the Sarasota County Senior Advocacy Council and Josh Provides Epilepsy Support Group. Her most recent claim to fame is her marriage to Loyd Robbins in May of 2015. Love lives again!