Forget the "till death do us part" mantra -- cohabitation has become the new normal in the U.S. Most millennials will move in with a significant other before marriage, and a high percentage of them will end up packing their boxes to leave. A National Center for Health Statistics report found that of those who cohabitate in the U.S., 27 percent of those couples will break up.
While there are laws and courts dedicated to helping soon-to-be ex-spouses distribute marital assets, the bonds of cohabitation are often limited to a lease and maybe a joint cellphone bill. More rarely, there is a joint checking account, a car loan and a credit card or two.
But in the U.S., in the absence of a specific document assigning financial responsibility to one partner or the other, there isn't any legal recourse when one person fails to make good on joint obligations. In these cases, someone ends up being simply out of luck, and this or her credit takes a hit. For the person or company owed the money, there's plenty of legal recourse -- from eviction, to placing a bill in collection and suspending service, to debiting a designated checking account. But plenty of otherwise financially upstanding citizens have found themselves holding the bad-credit bag when a partner has bailed.
So here are five things you can do to protect your good financial name in the event that stars, once aligned, go spinning off into the cold universe, and you find yourself thrust from loving cohabitation into relational isolation.
|Pick the right kind of lease.|
Ask for a lease that holds each of you responsible for half of the rent, rather than one that makes both of you responsible for the whole deal. If your landlord won't let you sign that kind of lease, consider renting the apartment in one person's name and having him or her rent half of it to the other: it's harder to recoup your losses if the person named on the lease bails, but you're still legally tied to them.
|Split the bills.|
There's no more certain recipe for financial heartache than if all the bills are in one partner's name -- and no easier way to make sure no one slips out under the cover of darkness without bearing some of the burden than making sure each person holds some of the responsibility. If one person's name is on the electric bill, make sure the other is responsible for the cable.
|A joint financial account doesn't need to be a share-everything plan.|
If you and your partner decide to take the leap into the land of the joint bank account or joint credit card, don't put all your eggs in one basket (or all your dough in one account). It's easy enough to set up a joint bank account from which joint bills are paid and to which each partner contributes a certain amount of money from their personal accounts. It's also easy to apply for a joint credit card but request a lower credit limit than you might otherwise be offered. Either way, even if one person cleans out the account or maxes out the card to pay for the proverbial bus out of town, the other person won't be wiped out.
|Close those accounts.|
Joint accounts should be closed or separated immediately. In most states, you have no recourse to get your money back from a cleaned-out joint account or force your now-ex to pay a credit card bill that he or she maxed out. If both names are on the account, the creditor (or collection agency) can come after both of you (and will likely go after whoever is easier to find). Separate out your cellphone bills, transfer utilities to the name of the person remaining in the apartment (if anyone) and even cancel that joint gym membership (which may well be easier said than done).
|Settle the lease.|
The only thing worse than being evicted from your apartment is having someone skip out on a lease that was only affordable because there were two people paying. However, many landlords will be amenable to working with you if you give enough notice, make an effort to pay the rent in the meantime and especially if you help find a new tenant. They're just looking to make money off their property, and evictions and lease-skippers are more expensive than re-renting the place before the original lease is up. (Plus, in many cases, they'll probably be able to raise the rent.)
It's not easy to look at a relationship in financial terms, but by cohabitating you're effectively injecting financial terms into your relationship. Therefore, it's important that you both feel those terms are fair and provide some protection when the bloom is off the rose and the garden weasel has torn up the soil. It's bad enough to get your heart broken, but there's no reason to compound the pain by screwing up your good credit, too. And it should go without saying that if you're worried about how your ex may have tanked your credit, be sure to check your credit reports for free once a year, and use free tools (like Credit.com's Credit Report Card, for example), to monitor your credit scores every month.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.