Relationship Debt - What happens if You Split?

The end of a relationship can be distressing in many ways, including financial.

If you’ve shared finances with your partner or been together for a considerable period of time, there are going to be financial issues you need to resolve.

When a relationship is going well, you rarely think about the consequences of a separation.

However, it’s important for everyone to know more about relationship debt – what happens if you split?

By understanding how the law applies to these situations, you can protect your own interests and avoid getting into financial difficulties.

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Do You and Your Partner Have Joint Debts?

If you and your partner took out loans or credit cards together, then you will both be liable for the outstanding balance.

Similarly, if you have a joint mortgage or a joint financing agreement, you will each be liable for repaying the debt.

Crucially, it’s important to understand that you will be liable for the entire debt – not just half of it.

If you have a $4,000 balance on a joint credit card and you make regular monthly payments after splitting with your partner, your liability doesn’t end when you have paid off half the debt.

Even if your ex-partner doesn’t contribute to the payments, you will still remain liable for the debt until it is paid off in its entirety.

Similarly, if you and your significant other agreed that one of you would be responsible for repaying a particular debt but it’s technically a joint account, you are still liable for the debt.

An informal agreement with a partner or ex-partner doesn’t change the contractual agreement you made with the lender.

However, it is essential to check whether an account is really a joint account.

You may be a named cardholder on a credit card, for example, but not be a joint account holder.

In such cases, you wouldn’t be liable for the debt as the agreement with the lender isn’t in your name.

Protect Yourself from Rising Debts

If you have a joint debt with an ex-partner, it’s important to freeze the account as quickly as possible.

If you have a joint credit card with a balance of $1,000 but a limit of $5,000, for example, your ex-partner could max out the card after your split and you would still be liable for the debt.

Of course, many people have more than one credit card so this could be magnified if you have two, three or more shared accounts with your ex-partner.

Although no-one wants to imagine someone they once loved acting in such a way, it happens more often than you might think.

By freezing or suspending joint accounts when you split, you can safeguard your finances and your credit rating.

What Happens if an Ex-Partner Becomes Insolvent?

If your ex-boyfriend or ex-girlfriend files for bankruptcy or makes a consumer proposal, it’s going to have an impact on your finances if you have joint debts.

When an ex-partner files for bankruptcy, for example, they may be absolved from repaying their portion of the debt, but you won’t be.

In fact, you’ll simply become liable for paying the full outstanding amount.

Similarly, if an ex-boyfriend or ex-girlfriend files a consumer proposal, they may agree to pay the creditor a reduced sum, but you will remain liable for whatever is outstanding.

Essentially, you’ll be left with no choice but to take on sole liability for a potentially large debt.

In many cases, people are compelled to file for insolvency when a partner or ex-partner does, simply because of the financial mess it leaves them in.

Should You File for Insolvency?

Filing for bankruptcy or making a consumer proposal isn’t something to be done lightly.

However, it may be the best way for you to deal with your debts and overcome financial hardship.

While both bankruptcy and consumer proposals do have a long-term impact on your credit file, you can repair your credit rating over time.

Furthermore, filing for either bankruptcy or making a consumer proposal can help to reset your finances and get you a step closer to living a debt-free life.

Before you can decide whether or not you should file for insolvency, however, it’s important to speak to a licensed insolvency trustee.

What is a Licensed Insolvency Trustee?

A licensed insolvency trustee, or LIT, is someone who deals with bankruptcies and consumer proposals.

As regulated professionals, LITs are well-placed to ensure the process of filing for insolvency is fair for all parties.

In addition to this, a licensed insolvency trustee can explain the process to you in detail and help you to determine whether filing for bankruptcy or making a consumer proposal is the right choice for you.

As bankruptcies and consumer proposals are governed by the Bankruptcy and Insolvency Act, there are certain procedures that must be followed when you’re filing for insolvency.

In fact, the law stipulates that bankruptcies and consumer proposals must be managed by a licensed insolvency trustee (also known as a consumer proposal administrator when handling a proposal).

This helps to ensure the process runs smoothly and that everyone’s interests are respected.

Talk to a Licensed Insolvency Trustee Today

Dealing with a breakup can be difficult, no matter what the circumstances are.

However, financial stress can make the situation far worse.

By addressing your finances and identifying potential debt problems, you can ensure that your financial future won’t be negatively impacted by the split.

Although dealing with complex financial issues may seem overwhelming right now, the vast majority of people feel that a weight has been lifted once they have a clear financial plan in place.

In addition, focusing on your finances can help to distract you from the emotional impact of a recent relationship breakdown.

If you’ve split with a partner and you want to find out what impact it will have on your finances, talk to Bankruptcy Canada today.

Simply call us on (877) 879-4770 and we’ll provide all the information you need.

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