Breaking up after five years is rough. Breaking up when you're jointly responsible for a house, two vehicles, and several loans? That's a financial nightmare that makes the emotional side look simple.
Rachel called "The Ramsey Show" two months after ending her relationship, still legally bound to her ex-partner through multiple joint debts. Family members had suggested bankruptcy as a clean slate solution, which is what prompted her to call in for a second opinion.
Personal finance expert Dave Ramsey shut that idea down fast. "Filing bankruptcy on this is kind of like taking poison and hoping he dies — you're killing you," he told her.
He explained that bankruptcy wasn't appropriate for her situation, given her income level and how the debts were structured. "You will have filed bankruptcy for no reason, because you're not bankrupt — you just have a partnership disillusionment," Ramsey said.
The Full Financial Picture
Rachel laid out the extent of the entanglement. There are about five shared financial items total, including a house, two vehicles, and at least two personal loans. She was still trying to confirm whether an additional loan is jointly held or sits in her name alone.
Both names appear on the house deed and mortgage. An online estimate put the home's value around $130,000, with roughly $90,000 still owed after a recent refinance, though Rachel questioned how accurate that valuation was.
Then there's the vehicle debt. One loan covers a truck originally financed for about $42,000, with roughly $30,000 still outstanding. The second vehicle is a car valued around $20,000, with a similar balance remaining. Rachel is currently driving the car.
On top of that, the remaining shared personal loans total about $8,000. The good news? They don't share credit cards and never opened a joint checking account, which at least keeps some boundaries in place.
"You signed all of that," Ramsey noted, emphasizing that both parties remain legally responsible for every single obligation.
New Job, New Living Situation
Rachel's financial picture is actually improving on paper. She recently changed jobs, boosting her income from the $60,000 to $65,000 range up to between $80,000 and $85,000 annually.
After the breakup, she moved out of the house so her former partner and his sons from a previous marriage could stay there. She said they've discussed handling the debts eventually, but there's a complication: both of their credit scores have declined over time, making refinancing significantly more difficult.
The Way Out
"Neither one of your lives goes forward easily with this mess unless you together figure out some way to undo the mess," Ramsey said, laying out a structured plan that requires cooperation from both parties.
His roadmap is straightforward but not easy. The house could be refinanced into one name, with the other party releasing their interest in the property. Each vehicle loan should be handled individually, either through refinancing into a single name or selling the vehicles outright to eliminate the joint obligation. That process would eventually leave only the remaining shared loans to untangle.
It's not a quick fix, and it requires both people to work together at a time when they'd probably prefer never to speak again. But compared to the long-term credit damage and legal consequences of bankruptcy when you're not actually insolvent? It's the smarter play, even if it's the harder one.