One of the most misunderstood topics is one focused on jointly held debts, also known as “co-signing.” This type of debt can be problematic, not only for yourself but also for the family member or friend who jointly holds that debt with you. For the other person, the calls will continue to come until they, too, are forced to deal with the debt in some form.
But what is a co-signed debt? This type of debt could be something as straightforward as your dad agreeing to help you out with your first car loan so you can finally get a vehicle. Or it could be as simple as your spouse receiving a secondary credit card in your name from his bank and passing it along to you to use. In each of these cases, it is joint debt.
But what happens when one of the people who has that joint debt files a bankruptcy or proposal for protection from their creditors, disappears, dies, or ends up leaving Canada?
In those types of scenarios, the other joint debtor would end up being 100% responsible for the entire debt. That means the entire car loan becomes dad’s problem. Or that secondary credit card holder ends up on the hook for the balance owing on both credit cards.
It is easy for someone to say “I didn’t know the rules about having a joint debt” but all debt comes with rights and responsibilities. Despite this, it can often come as a surprise to the person who agreed to jointly sign the debt agreement when a creditor comes knocking, looking for repayment.
This can be even more problematic (and very confusing) when the joint debt holder lives in the same household. I have received more than a few anxious calls or emails from clients we have helped file a bankruptcy or consumer proposal, because the credit card company or collection agency continues to call and demand repayment, despite the filing of the insolvency proceedings.
“You told me that my creditors would not be contacting me!” they say, frustrated by the notices, calls, and emails they receive. “Why do they keep calling me?”
The filing of a proposal or a personal bankruptcy places a wall of legislation between the creditors and the person who has the debt. Sometimes we do not find out until after the bankruptcy or proposal is filed that the client had a joint debt. “I didn’t know you needed to know that” the client often says. “I was the primary cardholder – doesn’t that mean the debt just goes away?”
Yes, it does. For the person who filed for protection. But not for the family member or friend who jointly holds that debt. For the other person, the calls will continue to come until they, too, are forced to deal with the debt in some form.
So, my advice to you about joint debt is this: Try not to have any (if possible). If you share a credit card, bank loan or line of credit with your spouse or family member, reduce your liability by contacting the creditor and asking them to remove your name from the debt. If requested, credit card companies will often remove the supplemental cardholder from the contract. Just call them and ask.
If your debt has become a major problem, and you think you need some assistance getting it under control, please reach out to our licensed professionals today by clicking on the FREE CONSULTATION button, below, or giving us a call. We are here to listen – and to help you!