How You Can Get Out of Debt as a Couple

When you’re in a committed relationship, debt can get in the way of life goals like buying a house, starting a family, retiring, or even planning a family vacation. Some couples with joint finances and shared credit cards can wind up in debt together, and many enter into relationships where each partner comes with debt. But even if only one partner owes considerable sums, it still affects your life together.


Whatever your unique financial situation, working together to get out of debt can help you achieve your goals and get debt free. What that looks like is up to you and your partner, but these money management tips can help you work together to improve your financial situation.


#1 Open Up About Your Finances


It can be awkward talking about money when you’re dating, and for some couples, the relationship gets serious before they open up about their finances.


Find a time to sit down and share the details about your finances. You both deserve to have a clear and honest look at each other’s finances if you are going to work together to improve them. Share your income, debts, obligations, and supports,


#2 Discuss Your Goals


Talk to each other about what your goals are. Getting out of debt is one, of course, but why is that important to you? What do you plan on doing with your money once you are debt free? When you have a clear, common goal, you’re more likely to stick to a plan and save.


Becoming debt free means you will have more money to make decisions with. Talk to your partner about major savings goals like buying a house, saving for retirement, going on vacation, or making another major purchase. It will give you the motivation to stick to your debt payment goals.


#3 Budget Together


When you’re sharing finances with your family, you should manage a household budget together. It becomes everyone’s responsibility to work toward getting debt-free. When you’re sharing expenses and financial responsibilities, you have to accept making financial decisions with your partner – which may mean trimming impulse spending out of your lifestyle.


As you budget, start with your goal in mind. How much do you need to set aside every month to have it all paid down on the timeline you want? From there, add your essential expenses (like rent/mortgage, bills, etc.), and discuss how you can spend the rest. Talk about things like what purchases you can feel free to make independently and which you should make as a couple.

How to Support a Debt-Burdened Partner


There are many different ways you can help each other out, and not all of these suggestions will work for everyone. However, these are some ideas to consider if you want to fix your finances as a couple and get out of debt.


Share Your Expenses Based on Income


Many couples split costs straight down the middle – but they make different amounts, putting a bigger burden on the partner who earns less. The imbalance can make it harder for one partner to get out of debt while maintaining your standard of living. You could try splitting expenses based on income: for example, if your after-tax income is $60,000 and your partner’s is $40,000, you would contribute 60% to all split expenses and they would contribute 40%.


Paying Your Partner’s Debt


If one partner has large savings and another is struggling with high-interest debts, it might make sense for one partner to simply pay off that debt – if they are comfortable doing so and under the right circumstances. High interest rates prevent you from being able to build savings, as they make debt payments consistently more expensive. If as a couple you share savings, expenses, and obligations, it might make more sense to use existing savings to clear debt. Paying it now is less expensive than waiting, but it’s important to not risk your own financial security doing so.


On the other hand, having one partner with the resources to help in a crisis can also be invaluable. This is a delicate topic and depends on the unique situation of the couple.


Consider Debt Relief


Finally, consider options like bankruptcy or a consumer proposal. These are two types of debt relief that will forgive part of your loans and give you a clear path toward clearing your debt. A consumer proposal is an alternative to filing bankruptcy that does not require you to give up any assets. Instead, you make fixed monthly payments for up to 5 years, while part of your loans are forgiven and interest stops accumulating.


Book an appointment with G. Slocombe & Associates and we can talk you through both of these options and what they would mean for your finances.


G. Slocombe & Associates

How Does Bankruptcy Affect Your Partner?


A commonly asked question is whether or not filing for bankruptcy affects your spouse. In Canada, filing for bankruptcy or a consumer proposal does not affect your spouse’s credit rating. The bankruptcy will only appear on the credit history of the person filing for it. Creditors cannot attempt to collect from the debtor’s spouse, and only debts from the person filing for bankruptcy are discharged.


There are some cases in which you or your spouse’s credit rating may be affected by insolvency. If you are filing bankruptcy on any shared accounts or you have co-signed on the loan, you will become solely responsible for those accounts unless you also file for bankruptcy or a consumer proposal.


If you share your debts, you might be able to file for a joint bankruptcy, but if you came into the relationship with separate debts, you are likely better off if only the partner who cannot pay back their creditors files alone.


Non-bankruptcy alternatives may also simplify the proceedings and minimize the impact on your relationship. If you jointly own property above the bankruptcy exemption limit set by the province, it may need to be sold, with the proceeds going to the creditors as well as the non-bankrupt spouse. In that case, a consumer proposal could provide a better solution.


Getting out of debt as a couple is still a challenge, but working together can make an enormous difference. Set a goal, make a budget, and talk to a professional about how your debt may wind up affecting your partner.