My spouse or partner has debt and I don't — what should we do?

You and your life partner do exactly that — you share a life together; but do you also share the burden of all of your debt too?

Any debt in both of your names, that you both signed off on thereby agreeing to be responsible for, is joint debt. Whether it’s a mortgage, a car loan, line of credit, joint bank account with overdraft protection, or a joint credit card, each of you is equally responsible to pay the debt in full plus interest as applicable/agreed to.

If you have no unsecured debt, but your partner does, where does that leave you if they can no longer make the required payments? This debt is solely the responsibility of your partner as they, not you, signed the application and agreed to repay the amounts advanced as approved by the lender. If your partner reneges on their agreed upon repayment of that debt, the lender cannot legally go after you to pay in their place.

The reality, however, is that if one partner finds themselves in financial difficulty in respect of the debt only in their name, chances are they’re also having difficulty contributing to their share of the living expenses of the family unit; the financial health of each partner affects the financial health of the family unit as a whole.

What can you do?

First of all, try to be as non judgemental and supportive as you can as that will more likely foster cooperation from your partner to share information needed to work towards resolution. In addition, chances are your partner already feels bad enough about the situation they find themselves in without your condemnation added in. Offer to be there with and for them every step of the way.

Next, get a handle on the family financial picture, which now includes resolving your partner’s debt obligations:

Step 1: Find out what exactly are your partner’s debt obligations. Have them make a list by creditor that includes creditor name, total current amount owing, minimum monthly payment obligation and interest rate. Add up the total minimum monthly payment obligation to get a handle on what this amount looks like just to stay current.

Step 2: Determine your monthly family income.

Step 3: List all your living expenses first: food, clothing, shelter, and transportation. Remember to allow for irregular expenses like grooming, dental appointments, kids sports/music lessons etc. as applicable, and for anything that you aren’t sure of, your best estimate will do. Assume that you will be paying cash on a go forward basis, with the goal being eliminating that debt.

Step 4: Deduct your expenses as determined in Step 3 from your family income, to arrive at how much is left over to pay down your partner’s debt.

Step 5: Compare the amount in Step 4 to the total minimum monthly payment obligation of your partner calculated in Step 1. Here’s how that looks:

1. Maybe there’s enough left over to maintain the minimum monthly payment requirements. How long, though, will it take to pay off those debts if that is all you can do?
2. Maybe there’s more than enough left over to pay the minimum monthly payment requirements. If so, how much are you comfortable paying extra on the higher interest debt to pay that down quicker, thus saving high interest costs?
3. How comfortable are you potentially contributing to repaying your partner’s debts? That may depend on how that debt arose, and what the money was used for.

We can walk you through it

Regardless of the outcome to this process, we’re here to help! Call us for a free, confidential consultation. Based on your financial situation, we will review ALL the pros and cons of the options available to your partner both legislated (such as personal bankruptcy and consumer proposal) and not (such as consolidation loans, use of asset equity) to help achieve a debt-free future that will reduce the stress you both feel.