Separation/divorce is one of the most stressful life events you can experience. It can take a huge emotional toll on the family unit and can decimate your finances.
Debt and Relationship Breakdowns
Divorce or separation is stressful if you’re in this situation you need legal advice and to understand the implications for joint debts and credit cards.
Legal fees, child support, alimony, and having to pay marital debts on just one income can make it tough to make ends meet.
For more than 25 years, Yanch Dey & Associates, Licensed Insolvency Trustee, has helped people like you deal with the financial fallout from their separation or divorce. During that time, we’ve found there are some common myths about separation/divorce and debt.
Myth #1 Debt Responsibilities
Myth – Our separation agreement states that my ex-spouse is responsible to pay our joint debt so I don’t have to pay it.
Fact – The creditors don’t care what your separation agreement or divorce order says.
Separation agreements are not binding on creditors or people you owe money to. A separation agreement is an agreement between you and your ex-spouse. If you are a co-borrower or a co-signor and your ex-spouse doesn’t pay the debt, you are bound by the existing contract you have with the creditor. As a co-borrower or a co-signor and you are responsible for the debt regardless of your marital status.
Myth #2 I Didn’t Use the Credit Card
Myth #2 – I didn’t use the joint credit card or line of credit card after we separated so I’m not responsible to pay those amounts.
Fact: Your separation or divorce does not automatically separate your joint accounts, credit cards, mortgages, or car loans. If a joint credit card exists and either party doesn’t make the payments, both parties are responsible for the debt.
It is important to put a freeze or close joint credit cards and lines of credits upon separation. By freezing the account one spouse cannot continue to incur debt that you could find yourself responsible for or that could impact your credit score.
Myth #3 I’m Only Responsible for One Half of the Debt
Myth #3 – There is two of us, so I’m only responsible to pay half of the outstanding debts.
Fact: Both spouses are equally responsible for 100% of joint debts regardless of who incurred the debt. This means that if your spouse incures a debt, where you jointly signed then you’re both responsible.
If your spouse doesn’t pay “their half”, or the debt goes unpaid, the creditor will still contact you for payment of the entire amount.
Bankruptcy, Consumer Proposals and Marital Debt
Separation or divorce is one of the most common reasons people find themselves in financial difficulty. The most important thing to do is get advice from a trustee in bankruptcy and insolvency.
At Yanch Dey & Associates, we can help you present a consumer proposal to your creditors to reduce your debt by up to 80%.
Or, if your income is not sufficient to file a consumer proposal, you could eliminate your debt by filing for bankruptcy. To find out more about how you can rebuild your financial life after divorce, contact us at 905‑721‑7506
About the Author
Brenda Owens is a licensed insolvency trustee having graduated from the Durham College Business Administration Accounting Program, with Honours, in 1993.
In October of that year, 1993 Brenda accepted a position with James R. Yanch, and received her Insolvency Trustee License in 2007 and started working as a bankruptcy trustee.
Over the years, Brenda’s ability to listen and thoroughly explain the insolvency and bankruptcy process and Consumer Proposals has helped hundreds of families regain financial control in Oshawa and Durham Region.