90 Centrepointe Dr, Ottawa, Ontario

Best practices for dealing with joint debts

Most couples who are separating have various debts in joint names- the mortgage, a secured or unsecured line of credit, and credit cards. Ideally, once you’ve separated, you want to separate your finances as soon as possible. Especially joint debts, because you can’t control if and when your spouse will decide to draw down the secured line of credit, or start spending on the joint credit card. Although allocating responsibility for joint debts is usually dealt with in the process of negotiating the terms of a separation agreement, this negotiation takes time, and someone can incur a lot of debt in a short period of time post separation, particularly if one party has a significantly lower income than the other.

There isn’t anything you can to guarantee that your spouse won’t rack up debts on the joint line of credit. In theory, both of you have the right to use the line of credit and if it’s secured against the house, the only way to cancel it is to pay out the balance to the bank and ask for it to be discharged. However, notifying the bank that they are not authorized to allow either one of you to make any further withdrawls from the line of credit might afford you some protection, depending upon your relationship with your financial institution.

You can, however, cancel any credit cards that you have with your spouse and put them in your name alone. If your spouse won’t be able to get a credit card under their name solely, as an interim measure, you may have to negotiate a reasonable credit limit to have on the joint card, and itemize what expenses they are allowed to charge to this card.

Leave a Comment