Divorce and separation: Who pays the debts?
Divorce and separation: Who pays the debts?
- If you’re in the middle of a divorce or separation, you might be wondering if you’ll get stuck paying your ex-spouse’s debts. One thing is certain, and that’s that you’ll never have to pay their personal debts—even if they declare bankruptcy.
- There are a number of ways you can reach an agreement with your ex-spouse to divide your joint debts and even your personal ones (if that’s something you want to do). If you are unable to reach an agreement, there are professionals who can help.
- In any case, it’s a good idea to get informed before you find yourself in the midst of an argument. There are some basic principles you should know about debts shared between spouses.
If I’m separating or getting divorced, will I have to pay my ex-spouse’s debts?
Absolutely not! Personal debts are personal, whether you’re in a relationship or separated. If, for example, your ex leases a car under their name, they’re the one who has to pay for it.
When some couples separate, however, they reach an agreement to pay back a personal debt together. They may agree informally (between themselves), through family mediation (with the help of an expert) or following a judgment in court (if they are unable to reach an agreement).
Do keep in mind that if you decide to make an agreement with your ex-spouse, your creditors won’t take this into account. To them, the people who signed the contract are responsible for the loan, regardless of what is happening with the relationship.
My ex-spouse and I borrowed together before separating. Now who will repay our loans?
Regardless of whether you’re together, you both signed the contract or contracts. Legally you’re in this together. That means if one of you doesn’t pay, the other will have to pay for both of you.
Of course you can reach an agreement to divide up your debts. One possible scenario: You agree to pay off your debts fifty-fifty. Another possible scenario: You agree to pay the entirety of a joint debt (a car loan, for example) while you ex pays another of your joint debts on their own (such as a line of credit).
Again, this agreement could be made informally, through family mediation or imposed by a judge.
Warning: Even if this agreement works well for you and your ex-spouse, it has nothing to do with your creditors. If you signed a car loan together, the bank will still consider you to have joint responsibility—regardless of the agreement between you and your ex-spouse to share your debts.
What happens to joint credit cards, accounts or lines of credit after a divorce?
You need to cancel these things with your bank as soon as possible. If you continue using a joint credit card after your separation, your ex-spouse can force you to reimburse all of your purchases. They can even sue you if you do not pay for the purchases you made.
To do immediately when you’re separating or divorcing
Heartbreak is hard. Don’t let money problems make things harder. Do all of these immediately:
- Close your joint bank accounts
- Remove your ex-spouse’s name from credit cards
- Check your credit report to make sure your info is up to date
- Update the names of the beneficiaries of your insurance policies, RRSPs, etc.
- Change your will or power of attorney, if necessary
- Advise the Canada Revenue Agency, Revenu Québec and Retraite Québec (for your family allowance)
- Call your service providers (phone, electricity, gas, etc.) to inform them of this change to your situation
It’s a well-known fact that divorce can be expensive. Sometimes it even leads to bankruptcy. If your spouse has debts, do you know what you’ll have to pay if you break up? You can find the answers here.
Do I have to pay anything if my ex declares bankruptcy?
If your ex-spouse declares bankruptcy or files a consumer proposal, you become 100% responsible for all of your joint debts. This is true before, during or after a separation or divorce. In short, you not being together anymore doesn’t change the situation.
But what happens if you’re unable to pay these joint debts by yourself? You may also need to declare bankruptcy or file your own consumer proposal. The main thing is to not let overindebtedness derail your life. Assess your options with an expert.
If my ex-spouse declares bankruptcy, what happens to the alimony they pay me?
Your ex-spouse will have to continue paying alimony and child support each month, even if they declare bankruptcy. Your spouse will always be responsible for making these payments, including any late payments they may owe. They will never be free of this debt, as they’re legally bound to it.
Even if your ex-spouse is bankrupt, you can pursue legal proceedings to get the alimony you’re owed.