What is Constrained Debt? – Forbes Advisor

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Lauren Cobello’s last relationship cost her $100,000.

When Cobello met her ex-husband, he had just moved and was looking for a job. He was quick to help the mother-of-four with errands and chores, so when he finally asked for a financial favor, she agreed.

“I’m a financial professional and was raised in the traditional sense of couples combining their finances and building each other up,” she says. “So I said ‘yes’ when he asked me to put it on my credit cards to help boost his credit scores.”

But the financial problems quickly worsened. The two planned a wedding and honeymoon, and at the last minute he confessed he couldn’t pay. Cobello paid the bill.

Then she co-signed her truck loan. When her ex-husband defaulted, Cobello took money from her retirement savings to pay the bill. She even helped him start a construction business.

After less than a year of marriage, Cobello says her ex-husband walked away with a paid truck and a business. She was left with a $100,000 debt, an ex she believed was stalking her, and an ineffective restraining order to keep her away.

Cobello, who would later find out his ex had done the same to a series of other women, used the experience as inspiration to launch Hard Money Talksa podcast on taboo financial topics.

Like Cobello, almost all people who experience domestic violence experience a financial abuse component. Being forced into debt can keep victims trapped in relationships and subject them to financial consequences for years after figuring out how to leave.

What is debt coercion?

Debt coercion is a form of financial abuse that occurs when an abuser uses fraud, theft, force, or misinformation to put their partner in debt.

According to a spokesperson for Surviving Economic Abuse (SEA), a UK-based advocacy group, this type of abuse is “an effective and long-lasting trap that drains the money a victim has, reducing their margin of maneuver”.

Here are examples of what debt coercion can look like:

  • Using a partner’s information to obtain credit cards or loans (also known as identity theft)
  • Using a partner’s credit card without their knowledge or permission
  • Forcing a partner into debt or signing financial documents
  • Refinance a mortgage or car loan without a partner’s knowledge

All of these behaviors can prevent someone from leaving an abusive relationship, says Lauren Duff of the Pennsylvania Coalition Against Domestic Violence (PCADV). Abuse can make it difficult to rent an apartment, open a bank account, or even get a job.

“It can prevent survivors from being self-reliant and accessing the resources needed to leave and not return to an abusive relationship,” Duff says.

Anyone can be a victim of this type of abuse, but people from certain demographic groups are more susceptible. Because women earn less money than men, especially women of color and mothers, they are at higher risk of financial abuse, according to reports.

What is financial abuse?

According to the PCADV, financial or economic abuse occurs when an intimate partner controls the ability of the other partner to access, acquire, use or retain economic resources.

On her podcast, Cobello says it’s easy to miss the red flags of financial abuse because it’s often disguised as love.

“[My abuser] and I had been together since middle school, and you couldn’t convince me that we weren’t in love,” says Jane, another survivor of financial abuse. His name has been changed to protect his identity. “You couldn’t convince me that he was taking advantage of me,” she adds.

After becoming pregnant with their third child, Jane’s partner convinced her to stop working and apply for government assistance.

“He had all these financial plans for our family,” Jane says, “and I thought he was smarter than me, so I believed what he said. But I also felt like I had no choice. I had nowhere to go. In hindsight, this was part of the plan to rob me of my independence.

Later, he encouraged her to use student loan money to buy a house for her family. But there was a catch. All their assets had to be in his name, he told her, since Jane was receiving government benefits.

Eventually Jane’s partner evicted the family from the house and the property was subsequently repossessed. Jane is still paying off those student loans. She initially withdrew $80,000, but now owes over $125,000 due to interest charges.

Jane suffered several financial abuse tactics. According to the PCADV, here are some of the most common behaviors:

  • Attempting to control or deprive a partner of access to their income and financial accounts
  • Preventing a partner from working or going to school
  • Withholding resources to limit your partner’s independence
  • Forcing a partner into debt or accumulating debt on their behalf
  • Stealing or destroying a partner’s belongings
  • Hiding or lying about financial transactions that affect the household
  • Misinform a partner about how money works in general

A 2018 Allstate Foundation study on domestic violence and financial abuse found that for people experiencing domestic abuse, the financial aspect of the abuse was one of the main reasons they couldn’t leave their home. partner.

How can you recover from financial abuse?

For survivors of financial abuse, the road to recovery can be long and costly. It is difficult to prove that the debt was accrued as a result of coercion, and even if you can, the law may not offer protection.

According to the PCADV, there may be ways to prevent and mitigate damage, depending on your situation. Once you are safe, the organization recommends taking the following steps:

  • Contact financial institutions. Update your passwords and work with your financial institutions to ensure that all account information is kept confidential. Open your own new accounts whenever possible.
  • Report any unauthorized credit activity. Review your free credit reports regularly and report unauthorized accounts and charges.
  • Work with law enforcement. Work with the local police or district attorney to seek criminal charges against the abuser and restitution for financial loss and harm.
  • Request court intervention. The court may be able to order the addition or deletion of names from financial or service accounts.
  • Start divorce proceedings. File for child or spousal support as soon as possible through your local DRO or private attorney.

The PCADV recommends keeping financial documents, such as proof of employment and income from your ex-partner. You should also document your correspondence with financial institutions and record communications with the abuser, including text messages and emails.

Keeping these items can be the key to proving you were abused, according to Duff.

Tips for escaping and recovering from financial abuse

Getting out of an abusive relationship can seem impossible when you don’t have control of your finances or when your partner is watching your every move or threatening violence, but taking small steps can open the door to a safe departure. Here’s what you can do:

1. Make a plan

You may not be ready to leave yet, but you can make a plan in case you decide to leave. Consider these details:

  • If you have children or pets, think about where they will stay.
  • Make copies of important documents and keys.
  • Get a rough idea of ​​how much money you’ll need to escape and get back on your feet, even if it’s just a few dollars for a bus ride to a local shelter.
  • Write down or memorize important phone numbers.

2. Start saving money

“Start saving your little secret stash,” Jane says, “because one day you’ll get fed up and you’re going to leave and you’ll need money and resources lined up.”

If you can set aside a few dollars, whether they’re hidden in your house, in your own checking account, or a friend keeps them for you, that money could help pay for transportation to a safe place. If you can save more, you might be able to buy your own cell phone, buy a flight, or make a deposit on an apartment or a down payment on a car.

3. Tell a trusted friend or family member

“A common tactic used by abusive partners is isolation: tricking the survivor into believing the lie that the abusive partner is the only one who cares for, understands and supports them,” Duff explains.

Even if you’re not ready to talk about all the details, try reaching out to a loved one for help. They may be able to offer resources, hold money or important documents for you, or just offer a listening ear.

“I think women know they want to leave someday, but they need a friend to help them come up with a plan,” says Jane. “It would have made a big difference if I knew I didn’t have to do it alone.”

4. Use local resources

Cobello says she received support from a local shelter for victims of domestic violence. “They offer free advice,” she says. “I did six months of free anonymous therapy and my counselor understood the financial side of the abuse.”

A financial therapist or counselor can also help resolve financial trauma or other emotional effects, and help you reset your goals, adds Cobello.

You can also locate your local domestic violence program by calling 1-800-799-SAFE (7233) for 24/7 help in over 200 languages.

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