Divorce and Debt
Putting an end to a marriage is an unfortunate situation that happens to many Albertans. Financial hardships, layoffs and job losses often serve as “the straw that breaks the camel’s back”, and in the aftermath, the existing debt that is shared between a couple still needs to be paid off even after both parties have moved on.
Danielle came to BNA Debt solutions in this exact situation. She and her partner had been married for 10 years. Between them they had amassed credit card, vehicle and mortgage debts that caused constant strain on their marriage. After deciding to get a divorce, Danielle was not only saddled with massive legal bills from the proceedings, but she and her ex-partner were still on the hook for the debts incurred during their marriage.
Divorce does not change what you owe
Any debt that is accrued during a marriage or relationship isn’t eliminated by a divorce or separation agreement. Regardless of the reasons or end result of the proceedings, any amount owing before the divorce will still be considered joint debts after the divorce. If one spouse files for bankruptcy or a consumer proposal, the creditors can, (and will), pursue the other partner for payment.
This is precisely the situation Danielle found herself in when she came to BNA Debt Solutions, and was not able to make headway in resolving their joint debt. She felt she was in way over her head and was beginning to feel like her divorce was only causing her more problems, as opposed to helping her get a fresh start. Danielle needed to be able to resolve the joint debt alongside her ex-partner, even though they were not on speaking terms.
Your Ex’s Debt is Still Your Responsibility
Even if you’re divorced or separated, and you have made a legal separation agreement that says you and your ex will split the debts evenly, you are still responsible for your ex’s debt until it is paid off. The legal agreement you made is between you and your ex, not between you and the lenders. To eliminate a shared debt, your lender must agree to remove one spouse from any debt they co-signed or guaranteed, and they usually will not do this. This includes joint credit cards.
How to Solve the Divorce and Debt Problem
A divorced couple can still file bankruptcies or consumer proposals on the joint debt. This is a very common method for divorced or separated couples who can no longer repay these debts due to the dissolution of their relationship and changes in their financial circumstances.
Deciding whether a bankruptcy or consumer proposal is the right path requires an assessment of each party’s financial obligations. In Danielle’s case, BNA Debt solutions was able to talk to both her and her ex-spouse in separate meetings, avoiding tense situations that could have made their stress levels worse. All BNA needed was a release signed by each party to discuss the situation and help them both move forward with less stress.
Our Licensed Insolvency Trustees were able to help the former partners make the right decisions on how to deal with their debt post-marriage. By opting to deal with the situation, they were separately able to forge a way forward in a mutually-agreed upon manner, eliminating their debt and allowing them both to make headway.
Divorce is never a pleasant process, and it can be made even worse when there are significant debt loads to pay off. Luckily, there is help to resolve the burden of debt and divorce in a professional and compassionate setting.
If you are interested in more information about your options for resolving your debt load before, during or after a divorce, contact us today or call 587 316 9090.
Get the straight facts on personal debt from our Licensed Insolvency Trustees. Download our Consumer Proposal Advantage Fact Sheet today.