At Sands & Associates every day we help people in BC who are struggling to manage overextended debts and want to know what they can do about it. Dealing with debt and financial issues can be major sources of stress for people, and money worries may often feel even more amplified in the context of a relationship.
Licensed Insolvency Trustees often hear from people with concerns not only about their own debts, but about debts their partner or spouse, or other family or friends may be dealing with. Many also worry about the impacts their own unpaid debts might have on their partner or family.
Read on for guidance to help mitigate or even avoid some of the familiar challenges debt can bring to you – and your important relationships.
Common Causes of Debt Problems in Relationships
There can be a lot to navigate when managing your money on your own, and when you add someone else to the equation things can get complicated quickly. Here are some frequent problem debt situations to be on guard against:
Misunderstandings About Legal Responsibility to Creditors
Many people are under the impression that if you marry (or are in a cohabitation relationship with) someone, you also marry their debt. This is false! Contrary to what you may have heard, there is no automatic liability that spouses assume to each other’s creditors just by being married.
- For example: If a person owes a bank $10,000 for a line of credit they took out as a sole borrower, then gets married, the bank is not suddenly able to turn to their spouse to pay that debt if the original borrower stops making the payments.
- This is especially important to understand before you pay off the debts of one spouse at the expense, or using the assets, of the other. Doing so you may be giving the creditor a greater return than they could otherwise achieve, to the detriment of the financial health of the couple.
Rather than being responsible for your partner’s debt through marriage or living together, a shared responsibility for ‘spousal debt’ may be triggered from:
- Co-signing or co-borrowing on debts together, including loans, leases, credit cards, etc.
- Any time you co-sign a debt you need to understand it is not a 50/50 commitment. ‘Joint and several’ liability has each borrower responsible for the entire unpaid balance, not half.
- Debts deemed as ‘family debt’ following the act of separation or divorce under BC’s Family Law Act.
- Creditors will continue to seek payment and collect on the debt from the legal borrower(s), even when debt becomes ‘divorce divided.’
Joint debt problems can linger long after a relationship ends, and people can be left struggling with debts they co-signed but never anticipated having to make payments on in situations where:
Your Former Spouse or Partner Isn’t Paying Debt as Agreed in the Relationship
If you have co-signed / joint debt with someone, you are equally responsible for paying back 100% of the unpaid balance due to the lender if the other person doesn’t pay, regardless of what the understanding between you and the other person was at the time.
- Some borrowing agreements even have an ‘acceleration’ clause which lets the creditor demand the full balance immediately if any part of the agreement is broken (like missing payments).
Always be clear and on-board with what you’re committing to. No matter the relationship, proceed with caution before you agree to co-sign or co-borrow with another person (or business).
- Be careful buying or leasing a vehicle together. Many people fail to realize the full commitment of joint vehicle financing because their partner plans to be the primary insurer and driver.
- Don’t assume that secondary credit cardholders have a lesser responsibility, credit card terms may vary depending on the lender.
Managing Debt and Household Money Matters in Your Relationship
Money can be a touchy subject, but it doesn’t have to be. No matter how long you’ve been living together, it’s always a great time to make positive changes – and if you can do this before sharing a household, even better. Start the conversation – get things moving out in the open and working together.
When it comes to a family’s budgeting and other financial strategies there’s no one right way to do it well – people need to decide together how to manage their finances in a way that works for everyone.
Have Open and Ongoing Conversations
Whether you decide to split household bills equally, based on percentages of each person’s income, assigning specific bills, or pooling it all, you won’t know the best way to manage your household finances unless everyone speaks up and has a say – and the sooner the better. In addition to deciding together how to manage costs, you might want to also consider:
- How you’re going to keep track of actual VS planned incoming and outgoing funds.
- If possible, give some room for individual personal spending power; plan and budget for each person to have some set discretionary spending money they can use as they see fit.
- Talking about your individual financial goals and setting some goals you can work on together.
- Do you have hesitations about taking on a financial commitment? Want to be saving for a big purchase? Share what’s in your heart and on your mind.
- Setting a standing meeting date and make it something you could look forward to doing together; “burgers + bills night” or “budgeting happy hour” – make it your own!
- Financial management never ends, so ensure you regularly connect and discuss your household money matters, in whatever way is best for you.
- Don’t be afraid to seek legal guidance to get organized, whether your relationship is ending or not. Tools such as cohabitation agreements aren’t just for celebrities or the ultra-rich and having a cohabitation agreement helps you understand where you’ll be at if the relationship ends.
While the best strategy is the one that provides the best outcomes everyone, you may want to avoid approaches that risk compounding dysfunction and could lead to resentment and miscommunication, for example where:
One Person Handles All the Finances
Sometimes there’s a tendency to delegate responsibility for managing all aspects of a household’s finances to one person, often because of a belief that “they’re better with money.” No one is born with money management skills; these take time to learn and understand.
- Expecting one partner to oversee everything from budget to bills to taxes and more is often a recipe for trouble. While it’s great to draw on stronger skillsets, one person shouldering everything alone becomes overwhelming and frustrating very easily.
- You might delegate certain aspects like bill paying, but it’s important everyone is actively involved, on the same page, and aware of what’s happening.
Although intentions may always be good, life happens, and unexpected events can create unanticipated financial challenges. Should this happen:
Don’t Try to Hide Money Troubles or Financial Issues
A debt problem can happen to anyone at any time, regardless of ‘doing all the right things.’ Many issues outside our control can leave us unable to keep up with all of our financial obligations. Fortunately, help is out there, whether you’re facing a challenge with debt solo or as a family – you are not alone and there are reputable, compassionate, professionals who will assist you in resolving debt issues together.
- As much as you may want to avoid dealing with a debt problem, especially if you worry about your partner’s reaction, it’s much better to confront the issues head-on. A lot can be gained though honesty with your partner and our best advice is to seek to understand the full situation and how to move forward together.
- Honestly, openness, and showing kindness to ourselves and our partner can go a long way – avoid blame or shame in these difficult situations.
Don’t hesitate to contact a Licensed Insolvency Trustee for non-judgmental professional guidance too. Licensed Insolvency Trustees are Canada’s sole debt professional fully empowered and qualified to offer advice about your situation and solutions to deal with debt for good.
Getting Debt Under Control
One of the best ways to set yourselves up for financial success as a couple or family is to deal with your debt. Taking debt right out of the equation can make a significant impact both individually and to the household unit.
- Consider alone the energy spent on the constant nag of credit card bills or loan payments, not to mention the money that debt payments take away from your budget.
- From arguments between partners to strained family relationships, many of Sands & Associates’ clients have shared with us how much debt affected their relationships before working with a Licensed Insolvency Trustee to take back control and put a stop to ongoing debt issues.
You may have multiple options to decide from in creating the debt-free plan that’s right for you and your situation. It will be important to consider whether you’re dealing with just one person’s debts, separate debts, and/or joint debts. A Licensed Insolvency Trustee can help you understand the varied factors to consider and weigh all the pros and cons.
- Seek support from a Licensed Insolvency Trustee right away if there are signs that your debts are becoming a worry. Many people struggle for a long time unnecessarily because they don’t know the facts, their options to resolve problem debt, or how they can better manage paying off debt.
There are accessible solutions to protect you from creditors and help you and/or your spouse or partner reduce and pay off debt in a timely and affordable way.
Access Professional Debt Help Services and Support in BC
Sands & Associates serves residents across BC and getting advice and information about all your options is as easy as setting up a free confidential debt consultation. We offer all our services virtually or in-person, so you can get support in the manner most comfortable and convenient for you.
- There is no cost to connect, and it could take less than an hour to get your debt-free plan.
Whether you are starting to worry about your debt, have felt stressed for some time, have a ‘great’ credit score or are facing collection actions – we are here for you, without judgment.
Sands & Associates’ caring experts help residents across BC get the debt-free plan that’s right for them. Connect today, book your free confidential non-judgmental debt consultation.