Dealing With Debt In A Common-Law Relationship

Debt Problems In A Common-Law Relationship

In recent years, the dynamics of relationships have seen a significant shift in Canada. A growing number of Canadians are opting for common-law relationships as opposed to traditional marriages. As per the latest census by Statistics Canada, over one-fifth of Canadians were part of a common-law relationship in 2016.

Even though the legal perspective of common-law relationships may differ from that of marriages, financial concerns, particularly debts, remain a primary source of stress, regardless of marital status. This article aims to provide an in-depth understanding of dealing with debt in a common-law relationship.

Understanding A Common-Law Relationship

The interpretation of a common-law relationship is not uniform across Canada and varies from province to province. For instance, in Alberta, common-law couples are legally termed as “adult interdependent partners” under the Adult Interdependent Relationships Act. A couple is considered to be engaged in a common-law relationship after cohabiting for a minimum of three years or if they share a child.

However, the federal government’s interpretation differs. According to The Income Tax Act, you are considered to be in a common-law relationship if you’ve lived together for 12 consecutive months. It is crucial to remember this rule while filing your income tax return to avoid any discrepancies with the Canada Revenue Agency.

Common-Law Relationship And Shared Debt

The concept of shared debt in a common-law relationship is not straightforward. An individual typically becomes responsible for their common-law partner’s debt under the following circumstances:


Joint Borrower or Co-Applicant:
This is a common scenario where the couple applies for a mortgage together. Both partners are equally accountable for repaying the mortgage to the lender.

In this case, you act as a “safety net” for the lender if your partner, being the primary applicant, fails to make the payments or cover the owed amount. The need for a co-signor usually arises when the primary applicant has a low credit score.

Supplementary Card Holder:
Your partner can request the credit card company to issue a supplementary card in your name, making you an “authorized user”. While this offers convenience, both partners may become jointly responsible for the balance due on the credit card.

Insolvency In A Common-Law Relationship

Based on data collected over the last four years, about 10% of consumers who filed with Bankruptcy Canada were in common-law relationships. The most frequently asked questions during free consultations about how their debt may affect their partner include:


  • Will my creditors target my partner if I file a consumer proposal or bankruptcy?
    A common-law relationship doesn’t automatically make your partner accountable for your debt. However, if you both apply for new debt together or one partner co-signs for the other, both partners become equally responsible for repaying the debt.
  • Will my low credit score impact my partner?
    The two main credit bureaus in Canada, Equifax and TransUnion, maintain separate credit reports for each individual. However, when a couple takes on joint debt, their individual credit scores get affected based on their payment history and debt repayment terms.

If you find yourself dealing with debt in a common-law relationship, it’s vital to have transparent discussions about your financial challenges with your partner. If your financial situation reaches a point where you can’t manage your debt, consider consulting with a Licensed Insolvency Trustee. They can provide a comprehensive assessment of your financial situation and suggest the best options for you.

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