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LOVE AND MARRIAGE AND SHARED DEBT

September 5, 2017

Married people don’t always share debts.

Just because you are married does not automatically mean that you share all of each other’s responsibilities in life.  Many people think that they share their spouse’s debts but that is not ‘simply’ the case.

There are different ways you can become responsible for someone else’s debts:

If you have co-signed something with your spouse then you are probably Ôjointly and severely’ liable – for example if you co-signed a loan for $20,000 you are each responsible for $20,000 not, as some people believe, $10,000 each.  

If you have guaranteed something for your spouse, or another person, your liability “may be” limited to a caped amount – for example the amount borrowed might be $40,000 but your guarantee is only for up to 50% of the amount borrowed, in this example you are responsible for $20,000.  

Sometimes you can have a “spousal card” that merely gives you access to your spouse’s account to be able to run up charges but you have no liability for payment of the account.

It is common for spouses to buy joint property, houses and cars, partly because banks like co-signers, the more people they can get to co-sign on a debt the more likely they are to get paid if something goes pear shaped.

As trustees in bankruptcy we frequently see one spouse carrying more debt than the other.  Sometimes this is a deliberate part of the family’s financial plan – one spouse shops more than the other and so has more credit cards.  And sometimes it is related to access to credit facilities, where one spouse earns more money than the other or is more responsible with debt payments than the other.

Just because your spouse has financial problems and either goes bankrupt or files a consumer proposal it does not necessarily mean that you will have to.  The decision will be contingent on your debt situation and how intertwined your financial lives are.  

However, marriage breakdown often precipitates financial difficulty – two people earning a low income and living in the same house can live more affordably than when they live in separate locations and have two sets of bills to pay.  That said it is also true that financial difficulty can precipitate a marriage breakdown – couples are often more open to talking about their sex lives than their financial lives even to each other.

Sometimes we do see couples filing joint bankruptcies or joint proposals – filing jointly can be cheaper as there is only one set of fees.  At other times we see couples taking opposite actions such as one filing a proposal and the other going bankrupt or one doing either a bankruptcy or proposal and the other continuing to pay their debts as they become due.

If you and your spouse are having money problems call the office and come in for a free consultation – we will review your situations and your options and provide you with good information that will you find the right solution.