*George Michael: Genius, train wreck, handsome man.
Back in 2009 Credit Education Week Canada’s theme was Couples and Money. A survey released at the time showed that 86% of couples admit to arguing about money. To the 14% who didn’t admit to arguing about money, please!
Money is cited as the number one reason for the breakdown of a relationship. When I first started working at Credit Canada I spent a year in the intake department and quickly learned that one of the top reasons for financial hardship is the end of a relationship. The loss of an income, support payments and alimony, to name just a few, are large expenses that no one in their right mind accounted for in their budget. If you’re ending a marriage, heck knows it’s not cheap to lawyer up!
Unfortunately, the end of a relationship is not necessarily the end of your woes if you have joint accounts. To your bank joint does not mean 50/50. If you have a joint savings account it does not mean that you are entitled to 50% of the balance. It means that two people have unrestricted access to the entire balance. If you have a joint savings account and are going through a nasty break up you need to lace up your runners tout de suite and hope that you get to the cash machine or local branch first. If not, you could get there to a zero balance. Your bank couldn’t care less if your ex honey is a jerk, whoever gets there first gets all the cash. It’s not their job to mediate.
If you must have a joint savings account you can usually specify how many signatures are required for withdrawal. It may not be romantic to specify two signatures for withdrawal but romance and finance are matters best left to their own confines.
If you have a joint credit your lender will not politely calculate 50% of what you owe and then stop collecting on your balance when you’ve paid your half.
The basics on debts in the event of a break up:
Debts in your name only are your responsibility. Debts in your partner’s name only are their responsibility.
If you’re dealing with a debt in both of your names you’re both responsible to maintain the payments. The lender couldn’t give two hoots who used the funds or who is paying fairly and will expect the payments to continue being made in full and on time. If payments are missed the lender will try to collect from both of you and both credit reports will be impacted even if you’re paying what you deem to be your half; if the payments are not made in full the account will default.
Please note that the term ‘co-signor’ is a euphemism for joint with the added kicker that you have no claim on the funds or asset. When you co-sign a debt you are not just helping someone get a loan; you’re guaranteeing the payments. You will be on the hook for any missed payments and so will your credit score.
It’s something to think about. We all have friends who have suffered from mixing romance and finance and know how complicated it can get. You may be able to offload a bad relationship but if all the things you sign and the things you buy are joint, they’ll keep you together for longer than you imagined. If you’re half of a couple experiencing money problems in a relationship that is otherwise perfect, please call us.
Frequently Asked Questions
Have a question? We are here to help.
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency. Working with a reputable, non-profit credit counselling agency means a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment. In Canada’s provinces, such as Ontario, these debt payment programs lead to faster debt relief!
Can I enter a Debt Consolidation Program with bad credit?
Yes, you can sign up for a DCP even if you have bad credit. Your credit score will not impact your ability to get debt help through a DCP. Bad credit can, however, impact your ability to get a debt consolidation loan.
Do I have to give up my credit cards in a Debt Consolidation Program?
Will Debt Consolidation hurt my credit score?
Most people entering a DCP already have a low credit score. While a DCP could lower your credit score at first, in the long run, if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve.
Can you get out of a Debt Consolidation Program?
Anyone who signs up for a DCP must sign an agreement; however, it's completely voluntary and any time a client wants to leave the Program they can. Once a client has left the Program, they will have to deal with their creditors and collectors directly, and if their Counsellor negotiated interest relief and lower monthly payments, in most cases, these would no longer be an option for the client.
