Marriage Debt Responsibility: Divorce, Debt and Bankruptcy

Quite often in our field, we meet with people who are experiencing a separation or are initiating a divorce because of debt problems. If your finances become unmanageable, without a doubt, your debts will begin to hold you and your family back from achieving short and long-term goals. Understanding marriage debt responsibility is a crucial first step.

Debt: A Cause of Marital Breakdown

Marriage debt responsibility is an important topic to understand whether you are currently experiencing financial issues or not. A major debt will also take away opportunities for families to enjoy some of the nicer things in life, like vacations. With proper money management, an insolvency proceeding and a drive to succeed, debts can be eliminated and a strained marriage can be saved.

Who is Responsible for the Debt?

We often come across spouses who believe that they are responsible for each other’s debt or fail to understand marriage debt responsibility. This couldn’t be further from the truth. The reality is that the person responsible for the debt is the person who applied for the product.

In some circumstances, people have been asked to co-sign or guarantee someone else’s debt.  If have you agreed to co-sign or guaranteed someone else’s debt then you will be held responsible here as well.

Another misnomer is that joint debt (meaning that two or more people applied for the product) is split evenly between all co-borrowers. That is not true either. Each person is responsible for the entire balance of the debt until the debt has been paid in full and the product closed.

For example, if Bank A lends John and Jane $20,000 and the debt goes unpaid, Bank A can sue both John and Jane, each for $20,000. If John files bankruptcy, Jane will be responsible for the entire amount, less anything that Bank A receives from John’s bankruptcy proceeding.

To summarize marriage debt responsibility, you are only responsible for the debt that you applied for, co-signed or guaranteed.

Debt Responsibility Before it is too Late

Filing a bankruptcy or a consumer proposal can give the financially burdened person some much-needed relief. If this is done before a marital breakdown, it could go a long way in saving a relationship. This is especially true when financial troubles are the main topic of stressful arguments. Simply put, you don’t have to let debt break-up your family.

Contact us today if you think debt is at the root of your marital problems. We can lend a compassionate ear, discuss your options for more information about bankruptcies and proposals.

Contact us today to discuss marriage debt responsibility, call us directly at 519-601-9793 or email us at jason@jcaal.ca.

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