For over three decades we have represented consumer debtors before the United States Bankruptcy Court and the Courts of the State of New Jersey. On occasion, the serious debt problems of our clients resulted from being deceived about money that was borrowed or debts that were not paid by their spouses or others with whom they had an intimate and trusting relationship. The problems of our our clients appear to be widespread.
A recent poll conducted for CreditCards.com reported on what has been termed ‘Financial Infidelity’. The article notes several interesting facts about how common it is for one spouse to be wholly unaware of their financial circumstances. As the author notes:
“Secret bank accounts and covert financial transactions aren’t just the stuff of spy movies — they’re surprisingly common features within U.S. households, according to a new national poll conducted for CreditCards.com.”
In fact, the poll suggests that:
Roughly 1 in 5 Americans who are in a relationship admit they have spent $500 or more without their partner’s knowledge. A smaller number — 6 percent — have taken the subterfuge a step further, leading financial double lives by maintaining hidden checking or savings accounts or using secret credit cards.
In our experience in representing clients, this “infidelity” comes in many forms.
Forged Credit Card Applications
We have represented clients whose signature was forged on the credit card applications by spouses or significant others who used the cards to purchase goods, services or to obtain cash advances. Our clients learned about the existence of these credit cards only when they began being harassed by debt collectors and then sued by collection attorneys for payment due on credit cards when they refused to pay.
There is a legal remedy for those who have been victimized in this manner. Demands for payment by debt collectors can be disputed and debtors who are sued can demand discovery of the credit card application on all the relevant documents, and thereby defeat a claim for payment. Unfortunately, this remedy is infrequently used in the most effective manner. Those who have been victimized often wait until judgments have been entered against them and garnishment or bank levy proceedings by creditors have been initiated.
Foreclosure – Failure to Make Mortgage
We have represented clients threatened with the loss of their home because they were unaware that mortgage payments were not made by their spouse who was responsible for the management of the families finances.
In one case our client, a man who was not well educated and worked many hours left the family finances to his wife and daughter. He learned that they had not been paying the mortgage only days before the Sheriff’s Sale of his home was scheduled when he found the Notice of Sheriff’s Sale under papers which had been piled up to be discarded. Fortunately, we were able to avoid the Sheriff’s Sale by filing a Chapter 13 Bankruptcy Petition and Plan on his behalf.
More generally, when martial partners and significant others have agreed to be jointly obligated to made payments on loans and one of those in the relationship conceals of otherwise fails to meet their obligation, filing a Bankruptcy Petition may be the best remedy available.
Federal Income Taxes – “The Innocent Spouse”
When a husband and wife file a joint tax return, they are both required to sign the return and are both responsible for the information on the return. However, the reality in most marital relationships is that there is a “division of labor” and the one of the spouses is primarily if not exclusively responsible for the preparation of the return. This makes the spouse who ‘ just signs’ the tax return vulnerable to claims be the Internal Revenue Service for any commission of income or claims for deductions on the return which are not allowed. This is particularly a problem when the spouse who control the preparation of the return is self employed and therefore has exclusive control of the information on the tax return.
The Innocent Spouse Rule, contained in Internal Revenue Code (IRC) § 6015, may offer relief, and, in a very limited number of circumstances, the Bankruptcy Code may allow the discharge of Income Taxes. Those confronted by this problem should promptly seek professional guidance to determine if they qualify and how a remedy can be achieved.
If you find yourself in a situation in which you feel you may be the victim of “financial infidelity”, to protect yourself and your family, take the time to schedule a consultation with an experienced attorney to learn about your rights and responsibilities in this situation and what options you may have available.