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By Susan Ladika | Study Finds Domestic Violence, “Coerced Debt” Often Go Together | 09-26-2012 | CreditCards.com
The phrase "domestic violence" usually triggers thoughts of physical abuse, but another form of torment is now drawing scrutiny -- financial abuse.
By surreptitiously taking out credit cards in victims' names or getting their hands on the marital assets, abusers saddle victims with debt and use consumer credit as another way to exercise control while destroying their victims' credit and making it harder for them to escape.
"Financial abuse pretty much goes hand in hand with domestic violence, and domestic violence is all about control," says Persis Yu, an attorney with the National Consumer Law Center.
Angela Littwin, an assistant professor in the School of Law at the University of Texas at Austin, has noted the link between domestic violence, bankruptcy and what she terms "coerced debt" -- any nonconsensual, credit-related transactions that take place in a violent relationship. In July 2012, she published an article in the California Law Review, "Coerced Debt: The Role of Consumer Credit in Domestic Violence."
Littwin calls coerced debt an unstudied area that is just now appearing on the radar screens of credit counselors, divorce lawyers and law enforcement. "Addressing coerced debt is one of the final frontiers of the multicentury legal project of securing women's financial independence," she writes. In an interview, she calls it "a tactic of abusers. It keeps people from being able to leave."
She attributes much of coerced debt to the ease of applying for credit cards -- often done online or by mail. Simply knowing someone's personal information, such as date of birth and Social Security number, is often enough for an abuser to get his hands on a credit card in the victim's name, then run up tens of thousands of dollars in debt.
t's a big change from having to go into a bank and request a credit card. "You could not have had coerced debt before we had mass access [to applications] and mass anonymity," Littwin says.
Littwin first noticed the problem while working as a co-investigator in 2007 on the Consumer Bankruptcy Project, which looks at reasons consumers file for bankruptcy.
A substudy of the Consumer Bankruptcy Project found that 18 percent of the 258 women interviewed had been a victim of domestic violence in the year before they filed for bankruptcy -- a rate far higher than that found in society as a whole. Although anyone can suffer from domestic abuse, females are far more likely to be its victims.
Estimates range widely on the prevalence of domestic violence in society; Littwin's study compared the Consumer Bankruptcy Project findings to other studies that estimated its prevalence to be between 1.5 percent and almost 10 percent.
Meanwhile, the National Intimate Partner and Sexual Violence Survey, conducted by the Centers for Disease Control and Prevention in 2010, found that more than 12 million people annually suffer from domestic violence.
For those in the Consumer Bankruptcy Project who acknowledged they were victims of physical abuse, more than half said they had been grabbed, pushed or shoved; more than 30 percent had been slammed against the wall, punched or hit with something that could hurt or had something thrown at them that could hurt; and 6 percent said their abuser had used a knife or gun on them. About one-third said they'd been sexually abused, while almost half said they'd been stalked.
The physical abuse is often accompanied by financial abuse through coerced debt, which might mean secretly taking out credit cards in a victim's name; forcing the victim to take out a loan for the abuser; or duping the victim into signing a quit claim deed for the family home.
Laura Russell, supervising attorney with The Legal Aid Society in New York, has worked with domestic violence victims for nearly two decades, and has seen a boom in coerced debt in recent years. "The Internet has made it much more prevalent."
Russell once received a call from a victim who had learned her abuser had run up $35,000 in credit card debt in her name.
"Much identity theft is done by people you know," Russell says. And many times, "credit card companies are very skeptical about claims of identity theft if you're married."
Once the abuser has his hands on a credit card, he'll run up a balance, intercept the bills so the victim is none the wiser and not pay what's owed, Littwin says.
In other cases, the abuser will dupe the victim into taking out a loan, which he uses. Russell says the abuser will make comments such as: "My credit is really shot. Why don't you put it in your name?"
She receives one or two calls a week from women who have fallen prey to coerced debt. Her clients typically are women from lower-income households with little money, or the household has money but she has no access to it.
While some victims are dumbstruck when their credit reports are pulled and they find they have piles of debt, about 60 percent had been suspicious because they'd received a perplexing letter or call from a collection agency.
Pull your credit reports
Pulling a credit report "can help a survivor understand the scope of what the financial situation was," Yu says.
Another form of financial abuse comes when the abuser controls the purse strings and gives the victim an unreasonably low amount as an "allowance" to buy groceries and other household necessities, says Russell.
Some victims will rebel and secretly take out credit cards of their own. Dorothy Barrick, group manager and financial counselor at the nonprofit consumer credit counseling agency GreenPath Debt Solutions, says she typically deals with one or two clients each month who have run into financial difficulties by using credit cards to supplement the meager allowance they receive.
They will often use the credit card to buy food and clothing for their family or to pay fees if their child wants to take part in an after-school activity, Barrick says. Others are mentally abused and use shopping as a means to cope.
"There are all different reasons for why they did it and what made them use it," Barrick says, but universally, all are afraid of the consequences if their partner found out.
"We allow them the right to keep their secret," Barrick says, although she will recommend they talk to an attorney or domestic violence counselor.
Victims typically come to GreenPath when they've maxed out their credit cards. "They can't borrow more and they can't come clean. They're really stuck in a hard place," she says.
Asking for assistance is a way to try to avoid filing for bankruptcy and having their secret exposed. In some cases, a credit counselor is able to work out a repayment plan with creditors. Other times -- if there's no imminent threat of violence -- a counselor and the victim together will tell the spouse what has occurred.
GreenPath's Barrick urges victims to turn to an expert for assistance. That way "they're much better off than thinking there's no hope, no one they can talk to."
Which comes first, debt or domestic violence?
The ties between domestic violence and debt are a kind of chicken-and-egg phenomenon. The experts aren't sure if debt begets domestic violence, or domestic violence leads to debt.
Bankruptcy expert Jean Braucher, a law professor at the University of Arizona, supervises university law students who work with Southern Arizona Legal Aid, which serves lower-income clients. "Their experience is that domestic violence and debt go together, and the causal effect seems to go both ways."
Debt causes family stress, which can lead to increased domestic violence, Braucher says. And when a family is burdened with domestic violence, it can be even more challenging to live on a tight budget.
At the same time, "The violent partner often controls the finances during an abusive relationship and after the breakup, the victim finds out about debts her partner incurred. Bankruptcy may be needed to get out from under that kind of debt," Braucher says.
In 2011 alone, more than 1.3 million consumer bankruptcy filings were recorded, according to Epiq Systems, though no one can say how many of the filings were from households plagued by domestic violence.
Even if a domestic violence victim doesn't file for bankruptcy, it can be a major challenge to start over.
Littwin writes in her article that for credit purposes, the courts typically consider spouses to be one financial unit. During a divorce, some states allow domestic violence to be considered when dividing assets. But divorce decrees don't divide debts.
"Even if a divorce court decides that an abusive spouse is responsible for paying a debt he has fraudulently or coercively incurred in the survivor's name, creditors still consider the survivor liable, so a division of debt favoring her will be only a paper victory," Littwin writes.
Another complicating factor, Russell says, is that debt issues need to be handled in civil courts, which are not accustomed to dealing with domestic violence cases.
And a tainted credit report has far-reaching implications. These days, it's not just lenders who make use of credit scores. Employers can run credit checks on potential employees, and landlords, utility companies and cellphone companies take credit scores into account, too.
Those financial hurdles can prevent victims from leaving abusive situations, Littwin says. "It's difficult, if not impossible, to establish an independent household when your credit report is in such bad shape."
Tips to protect yourself from financial abuse, coerced debt
Knowledge is power if you're a victim of coerced debt.
Victims of this form of financial abuse, which studies have found can coincide with domestic violence, often are blindsided when they learn their abuser has run up tens of thousands of dollars in unpaid debt in their name, ruining their credit in the process.
If you're suspicious of what's going on, you need to monitor your financial affairs. But that can be a challenge if you're still living with your abuser.
Laura Russell, supervising attorney with The Legal Aid Society in New York, cautions, "Whatever she does, she has to do it safely." She suggests going to the local library to do your digging so there's no record on your home computer.
You're entitled to a free credit report from the three main credit reporting agencies each year at AnnualCreditReport.com, so Russell suggests pulling a different report every four months to make sure there are no credit cards you're not aware of, and no missed payments, under your name.
Also check bank accounts and county records to make sure your name is on the deed to your home, she says.
While it may be hard to imagine that your spouse or partner has stolen your identity, in reality it's not uncommon.
Nikki Junker, victim adviser and social media manager with the nonprofit Identity Theft Resource Center, often advises domestic violence victims. Her first suggestion is to take out a restraining order against your abuser.
Then file a police report that your identity has been stolen and report credit cards that have been taken out in your name. "Leave a legal trail," she says.
Other important steps are:
Putting a fraud alert on your credit report. Contact one of three main credit bureaus -- Experian, Equifax or TransUnion. If you contact one, they're required to contact the other two.
Calling and notifying banks and credit card companies about fraudulent activity and close accounts.