Managing a huge amount of debt is tough enough, but it can be complicated when you have a spouse in the picture. A common concern many Canadians have on their mind is “ Am I responsible for my spouse’s debt in Canada”?
More specifically, many people are concerned about partnering up with someone who may have a huge debt pile of their own. On top of your own debt that you have to manage, will you have to deal with your spouse’s debt too? More concerning, will your spouse’s debt automatically become yours after you tie the knot?
Am I Responsible For My Spouse’s Debt In Canada After Marriage?
Personal loan debt that each person brings to the marriage before nuptials are exchanged remains each individual’s responsibility. That means each spouse will not be responsible or liable for any pre-existing debt that the other has accumulated before the marriage took place.
The exception here is if you co-signed on any credit account, whether it was before you got married or after.
Otherwise, any pre-existing debt remains each person’s responsibility and not both. So, if debt collectors ever come after your spouse for their unpaid debt, you will not be dragged into it if your name is not on the loan. The same applies if you ever divorce: any debt that was brought into the marriage by your spouse will not be your responsibility but will remain with your (ex) partner.
Am I Responsible For My Spouse’s Debt In Canada, Particularly Credit Card Debt?
No. As mentioned, any debt that is in your spouse’s name, will not be your responsibility. However, if your name is on the account with theirs (ex: joint credit card account), then you can be held liable for any unpaid debts on that credit card.
Before you sign up for a joint credit card account, be sure to discuss your finances and debts with your spouse.
Am I Responsible For My Spouse’s Debt In Canada, Particularly Student Debt?
After marriage, living with debt can get more complicated due to the presence of newer, larger expenses, like a house, children, and even the wedding itself. Your spouse may also be finishing their education and paying down a student loan. Thankfully, you can’t be held responsible for their student loan debt, as long as they’re the sole account holder.
Am I Responsible For My Spouse’s Debt After Marriage, Particularly Car Loan Debt?
If you have a joint car loan, you’ll be just as responsible for the car loan debt as your spouse. That means if you co-signed for your spouse’s car loan, you and your spouse will be liable for any missed payments.
However, if the car loan is solely in your spouse’s name, you won’t be responsible for the debt.
Will You Be Responsible For Joint Debt After Marriage?
A joint debt is when you sign a legal agreement to borrow some type of credit with your spouse, such as a loan. Depending on the circumstances, your lender might ask both spouses to apply jointly or for one spouse (typically the one with better credit) to act as a co-signer or guarantor. Either way, both spouses become responsible for the debt.
So, if one of you stops making payments or following the terms of your agreement, the other is held fully accountable for the remaining debt. In the case of a guarantor loan, the primary borrower is responsible until they can’t make payments. The co-signer must then take over those payments or both spouses may be penalized.
Will I Be Responsible For My Spouse’s Debt After Marriage If They Die?
If your spouse passes away, their debts won’t just disappear. Don’t worry, because you can only inherit that debt if the account was owned jointly. In Canada, a creditor cannot demand payment from you if the debt is solely in your spouse’s name.
However, your spouse’s debt will become part of their estate. Creditors get a claim on said estate, as well as the right to be repaid before any funds are given to the beneficiaries in your spouse’s will. So, even though you aren’t liable for your spouse’s debts, any unpaid balances will be withdrawn from the inheritances they leave behind.
How To Deal With Debt As A Couple
Debt can cause financial complications for a lot of married couples. Luckily, there are plenty of ways that you and your spouse can deal with debt together, including:
Communicate
Start by sitting down with your spouse to have the “money talk. Although it can be a tedious and complex subject, discussing your savings and long-term money goals is an important step toward building financial compatibility, which is essential in any marriage. After all, some of the main causes of divorce in Canada stem from money problems.
Understanding each other’s finances prior to marriage is a good way to prevent any of those problems from occurring. Plus, it can help both of you budget better and save for the future. Your discussion of money should be honest, not embarrassing or painful.
Check Each Other’s Credit Reports
To ensure the best financial compatibility possible, it’s a good idea to review each others’ credit profiles. This way, you’ll know exactly where each of you stands before you take on any joint debts.
You can check each other’s credit scores for free using Compare Hub.
Should You Combine Your Accounts?
Remember, if you apply for a joint debt, co-sign a loan with your spouse, or authorize them to be a user on your credit account, all payment information will affect both of your credit profiles from that point on. For instance, if one spouse has a worse credit score than the other, it can lead to higher interest rates when you apply together in the future.
Generally speaking, there are two ways you can handle your finances after marriage:
Combine Accounts
A joint account can be great for dividing everyday expenses and splitting the costs of larger loans, like mortgages. Plus, each spouse has complete access to funding if they have a financial emergency. That said, sharing accounts has its risks. Joint account holders are both responsible for any ownership liabilities and balances owing.
Keep Accounts Separate
So, if you and your spouse have different spending habits, it may be smarter to keep your finances separate. That way, you can manage your money independently and won’t be liable for any of their debts (or vice versa).
Although this requires a certain level of trust and communication, individual accounts can protect you during a separation or divorce.
Things To Ask Your Partner Before Marriage
Before you exchange vows, it’s important to have a frank conversation about finances. Money is often the number one problem in marriages and can be the reason for marital breakdown. So it’s certainly important to take the time to have a discussion about money before you say ‘I do’.
How Much Do They Owe?
Find out how much your partner owes before you get married. Also, have a discussion about how each person feels about debt and managing money. If you are on two completely opposite ends of the spectrum, you will need to come up with a solution. Otherwise, money problems will be more likely to arise.
What Are Their Financial Goals?
Discuss your financial goals with your partner as well before you get married. Find out what aspirations your partner has and be open about what your financial goals are. Being on par with each other in this department is not just convenient, but important.
Will They Agree To A Prenup?
You might also want to consider signing a prenuptial agreement. A prenuptial agreement may help protect you in the event of a divorce. This is especially true if you are going into a marriage with a lot of money and not much debt. Of course, this can be a touchy subject, so be sure to approach it with great care.
Final Thoughts On Being Responsible For My Spouse’s Debt Canada
At the end of the day, the only debt that you are responsible for is the debt that you sign your name on. If the debt is under both of your names, or you co-signed on your spouse’s loan, you are liable. But if you had nothing to do with any loans or credit accounts and did not sign your name to anything, you are off the hook.
FAQs On Spouse Debt
Should you sign a marriage contract?
What happens if my spouse files for bankruptcy?
Should I open a joint credit card with my spouse?
Will my spouse’s debt affect my credit score?
