In a couple relationship, it sometimes happens that one of the two spouses incurs debts. How can we ensure that these do not lead to discrepancies?
Debt is a burden for many Quebecers and also causes tension within the couple. The contract may have been made before the start of a relationship or while living together, but in both cases it is important to be transparent and have an action plan in place.
When debt harms projects
Véronique Joanis, speaker and trainer of L'Argent… Parlons-en, emphasizes that one of the reasons why debt puts such a strain on the couple's relationship is that it has a significant impact on the projects he may have can implement or not to achieve it. Taking a trip, having a child, buying a car or a house: all of this requires you to put money aside and, in some cases, the ability to borrow money and therefore a good credit rating.
However, the debt quickly affected our ratings with credit agencies Equifax and TransUnion. Result: The indebted spouse cannot participate in projects because the financial institutions refuse to grant him loans.
What to do in such a situation? According to Véronique Joanis, the most important thing is to show great transparency. “If you have debts when you move in, you have to declare it from the start. “Not mentioning it is a warning sign and can seriously damage the trust relationship with your spouse,” she warns.
Even in couple life, it can happen that one of the two partners gets into debt without telling the other and keeps financial secrets. According to the speaker, this usually happens when there is an underlying difficulty, such as gambling or consumption problems, which can cause very unpleasant surprises for the spouse.
Let's also remember that, according to a recent survey commissioned by BMO, more than a third of Canadians in a relationship believe their spouse spends too much money, and 32% admit that spending is often the cause of conflict are in their relationship. Additionally, 36% say they don't always tell their spouse the truth about their finances.
Repay alone or together?
While it is important to put the cards on the table, it is equally important to set a strategy. “This will help reassure the other spouse and show them that we are ready to find solutions to put an end to their debts,” says Véronique Joanis.
To do this, we first take stock of our assets and liabilities. We then create an annual budget in which we have to include an item for debt repayment. Undoubtedly, we need to save on other expenses and this is where spousal support is important.
If some couples assume that the burden of debt, regardless of origin, can be borne by both within the family budget, this will not necessarily be the option for everyone.
“Very often, everyone takes on the debt themselves for debts that were taken out before the couple. But you have to be careful: if, for example, it is a loan to buy a car and it becomes the family car, in this case you can do it “We're thinking about taking it on as a couple,” the speaker mentions. Other expenses that the family incurs, such as the purchase of household appliances, furniture, etc., should also be viewed as total debt and find their place in the family budget.
Repayment plan
For the good of the couple and to maintain the relationship of trust, it is crucial that the debtor shows his willingness to resolve the situation. It is then up to him to create a realistic and appropriate repayment plan.
While we typically recommend starting with paying off the highest-interest debts like credit cards, Véronique Joanis says we should instead focus on what matters most to us. “If a debt is weighing heavily on us, such as a loan from a loved one, we should start with that instead. It also helps to encourage yourself and stay on track if you first liquidate the lowest debts that can be paid off quickly. It’s case by case,” she notes.
ADVICE
- If the couple has decided to restructure their assets in order to pay off the debts of one of the spouses, it is preferable to indicate the amount of the debt in question in the deed to be signed by a notary. This can be taken into account when selling the property at a later date.
- If you are de facto spouses, it is a good idea to specify in a cohabitation agreement what each person is entitled to, namely assets and liabilities.