After Valentine’s Day, you may think you know everything about your spouse, and yet… Some have had very nasty surprises even after long years of living together.
These cases are not uncommon, says Sophie Desautels, licensed insolvency practitioner at Raymond Chabot. She recalls the situation of a woman in a 30+ year relationship who noticed her spouse was having gambling problems and her credit cards were overflowing. “She had a flea in her ear because her husband started getting insomnia and getting up a lot at night. At some point she found out about the readings and called us for advice,” she recalls.
Another example: A couple bought a house together. The spouse has incurred so much debt over time that the lending financial institution has placed a legal mortgage on the property. His wife was not aware of this, she only found out when the house was sold, when the proceeds from the sale were reduced by tens of thousands of dollars after the creditor had repaid them.
Everyone is liable for their debts, unless…
These situations are worrying and can be devastating for the couple. But according to Sophie Desautels, those financial secrets don’t necessarily affect the other spouse’s finances. “The rule is that everyone is liable for their own debts. Only joint debts can be shared,” she explains.
For example, if you have certified or guaranteed your spouse’s – or anyone else’s – debt, you will be fully liable if they fail to repay the creditor. If you vouch for or assume a debt, you are jointly and severally liable for it.
Worse still, let’s imagine that you gave your spouse a guarantee so that he could get a line of credit. If he went bankrupt, he would be free of his debts, but you would still be 100% – not just 50% – responsible in the eyes of creditors, who might therefore turn against you.
Caution: The person who is the holder of an additional credit card in a credit card account, even if they are not the main holder, can also be 100% liable for the debt, including that of the main holder. “At the moment it seems practical to be able to use an additional card, but you have to check in the contract whether you are jointly and severally liable if the main cardholder fails to fulfill his obligations,” recommends Sophie Desautels.
home ownership
If you bought a house 50/50 with your spouse, what happens if one of you goes into debt to the point of bankruptcy? “In a couple in a civil partnership, if one goes bankrupt and there is equity in the home, the other spouse may have to pay an amount as part of the bankruptcy to redeem that portion of the home and keep it,” says Sophie Desautels.
Therefore, if equity is available, the trustee will usually advise consumer filing rather than bankruptcy to preserve the property.
If there is no equity on the property, then the situation is the same as with other properties: as long as the mortgage payments are current and the mortgage is repaid regularly depending on the loan conditions, the house can be kept.
ADVICE
- It’s never too early to start talking about money in a relationship. While this topic is often taboo, we should approach the question as soon as we become seriously involved, especially when we start living together. Before you move in, you should at least find out whether your better half has debts, what kind of savings you have, what life plans and long-term goals you have.
- Failure to openly address the issue will only lead to communication problems and possibly financial secrecy.
- Don’t try to impose your idea of finances on the other person and instead look for compromises. For example, if your spouse wants to pay off the mortgage as soon as possible but you want to travel instead, offer cheaper travel destinations and devote the money saved on the travel budget to the mortgage.
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