‘Till Debt Do Us Partby Daily Web TV Team | 219 days ago | 426 page views
Sometimes ‘happy ever after’ doesn’t come true, relationships end and the resulting separation can often lead to serious financial problems. Of course, debt and financial problems will only make the stress and emotional hurt of a separation more difficult to get through.
“The first thing to know is that you are not alone,” explains Kendra Laing, from BDO Canada’s debt help office in Peterborough. “We understand because we help people every day, from all walks of life, who are dealing with debt problems caused by a separation. After all, when the same income has to support two households instead of one, problems can arise.”
“It is best to start by discussing what happens to the debts that both people ‘signed for,’” suggests Shelley Barker in the same Peterborough BDO office. The simple rule is that ‘joint debt equals joint responsibility’. This rule applies regardless of what a divorce or separation agreement may say. Creditors can sue either person who signed for a debt, even if a separation agreement says one person will pay it off.
“This law has the potential for serious consequences long after a separation,” explains David Noronha, Vice President and Trustee in Bankruptcy with BDO Canada. “Consider ‘Bill and Nancy ‘. After a separation, they have a separation agreement that says Bill will pay back the rest of a loan that both he and Nancy signed for. Well, Bill misses a couple of months of payments. Even though their agreement says Bill will pay off the loan, his missed payments will damage Nancy’s credit rating, as well as his own. Worse yet, if Bill continues to miss payments, Nancy could also be sued or have a collection agency try to collect from her with some harassing calls. The separation agreement is not enough to protect Nancy.
Supplemental credit cards can also be a problem. With the same number, they leave both people equally responsible for paying them off. This can be a cause for significant problems if these cards are used during, or after, a separation as they leave both people responsible for the bills.
“While joint debt leaves both people in a relationship equally responsible, it’s important to know that this is not the case for child or spousal support payments,” says Helen Brown, Estate Administrator in BDO’s Newmarket debt help office. “Child or spousal payments set by the court must be paid by the person identified by the court. Those are legal obligations and will be collected by various legal means if the person who is supposed to pay doesn’t.”
When a separation leads to debt problems, it’s important to know that you do have options. The best advice is to have all possible options explained to you, from budget strategies to debt consolidation and consumer proposals. All of these will prevent bankruptcy and the consumer proposal allows you to pay back less than what you owe and immediately stops interest and legal actions against you.