I met with a husband and wife in my Mississauga office the other evening and like many couples who see me they thought that because they are married they are responsible for each others’ debts. Typically, a household finds it hard to keep debt separate because if there is an issue with one debt, the consequences such as creditors calling usually affect everyone in the home.
While I am glad to see couples working together on a budget and seeing each of their respective debts as one debt to be dealt with by the household, legally there is no financial obligation to pay someone else’s debts. Joint debt does not automatically occur because you are married to someone. Joint debt occurs when there is a financial obligation between two people to pay a debt. Therefore you can have a joint debt with a friend, brother, sister, parent, etc.
The couple that I met with had a total of $55,000 in debt in credit cards, lines of credit and a car loan. He had credit card debt that totaled $27,000 and she had her own debts totaling about $13,000. The remaining debt was for a car loan at $15,000. They were both on the car loan debt, as she had signed the loan agreement, even though he thought of the car as his because he took it to work every day.
In addition, he had 3 credit cards totaling about $19,000, which she also had extra cards for. Extra cards or supplementary cards are offered by many credit card companies to the person who has the credit card or is the primary cardholder. The supplementary card agreement for all the cards indicated that she was also responsible for this credit card debt, making these joint debts. Of the total debt of $55,000, they had debt together or joint debt totaling approximately $34,000. The joint debt was significant, and represented a majority of the total debt, so it made sense for them to see me together to figure out a plan for dealing with it. By doing something together they were dealing with the problem and getting the benefit of stopping creditor calls.
When we sat down together we sorted out the debts – his, hers, and ours. They also brought with them a monthly budget, which detailed their take home pay after taxes and what expenses they have, such as rent, food, etc. As they were just starting out together, they did not have a house, but did want to own one someday and were concerned about filing for bankruptcy or doing a consumer proposal because of the effect it might have on their future home ownership. I reassured them that even after deciding on a course of action, they will start to rebuild their credit and eventually (just like baby steps) they would see their way to owning a home of their own. Many of our clients in the same situation do just that.
After we discussed the options for dealing with the debt, they decided that a joint consumer proposal was the way to go. Their debts in total were under $75,000 (not including any mortgage on a home) which is one criterion for doing the proposal, and they would stay in control of any assets. In this way, they could pay back a portion of the debt over a period of time that was less than five years, allowing them to budget each month for the required monthly proposal payment. It was a good plan given their income and debt.
If you are in a new relationship and are having trouble dealing with both of your debts, or if you are confused about which debts are joint or not, please give us a call at 310-PLAN for a free consultation. We can meet to discuss your options and a plan of action can be made for dealing with the debts.
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