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Separation from your partner is one of the many causes of financial distress. Not all couples may be aware of the fact that when you sign a contract together, you are responsible to repay all the money borrowed. Even if the person with whom you have signed is not a partner, say a child or a friend, you are still responsible for the debt. When you see key words in contracts such as borrower / co-borrower, debtor / co-debtor, applicant / co-applicant — you are obligating yourself; you are responsible for the debt.
But you may say, when we separated, my partner and I agreed to be responsible for specific payments. Unfortunately, the lending institution that you’ve borrowed money from has no legal obligation to honour personal agreements between you and your partner when that lending institution has a contract stating you will both repay all the money borrowed which means that no matter what the situation is; you are both responsible for the debt. Even a separation agreement prepared by a lawyer has no bearing on the lending institution as to whom is contacted; you are still responsible for the debt.
So, how do you protect yourself in the event of a separation? A good first step would be to confirm with creditors that in fact, you signed the contract “jointly.” Sometimes, a supplemental credit card holder has not signed an application and as such does not bear the responsibility of paying the debt. Contact your bank immediately and try to freeze the joint line of credit or other debt commitment before you or your partner have a chance to “run it up.” Banks may not want to work with you because they want you both to agree so you should likely see a lawyer immediately to help ensure you aren’t surprised by unexpected debt.
Contact Canada Revenue Agency, as well. You must amend your marital status information by the end of the month following the month in which your status changes. However, if either you or your partner are receiving the Canada Child Tax Benefit, the GST / HST credit or Working Income Tax Benefit, for these credits only, Canada Revenue Agency notes that notification and changes to payments of benefits will not be made until such time as you are separated for more than 90 consecutive days. This will help protect you in being assessed an overpayment of benefit.
Finally, it is important to note that if your partner files a bankruptcy or a Consumer Proposal under the
Bankruptcy and Insolvency Act, you now become the only person who is responsible for the debt. At that time, you may have to consider contacting a Licensed Insolvency Trustee who can assist you to identify solutions for you, tailored to your specific financial situation and needs.
Helen Dowell is an Estate Manager in our Windsor location. To learn more about how MNP Debt can help, contact our local office at 310-3328.
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*310-DEBT doesn’t operate in MB, NW ON and QC.
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