Supporting Clients and Patients with Divorce Debt

Canada has the 8th highest divorce rate in the world. Human Resources Development Canada has reported that the proportion of marriages expected to end in divorce has fluctuated between 35% and 42% in recent years. In 2008, 40.7% of marriages were expected to end in divorce before the 30th wedding anniversary. In 2008, there were 70,226 divorces in Canada or 2.11 divorces per 1,000 people.

Divorce debt in Canada is also very common. Human Resources Development Canada also reported that in 2008, 115,789 Canadians were unable to repay their debts. Serious financial difficulties brought them to file either a consumer proposal or a bankruptcy. Individuals who were divorced or separated were more likely to file a proposal or bankruptcy.

Why is divorce debt one of the leading causes of bankruptcy in Canada? The answer is fairly simple. First, two income households will often accumulate debt based on their “household ability to pay the debt”. The challenge with this is that debt is accumulated based on two people sharing living expenses and when people separate, living expenses will double because now each party has to pay for rent or a mortgage and living expenses separately. When household debt is present this can make it challenging to pay it.

Second, some marriages will involve one person working and one person raising the family. When divorce occurs, the party who hasn’t worked will likely have little to no income but be faced with the immediate expense of having to hire a lawyer and also live. In many cases this forces the party who has been home raising the family back into the workforce. Individuals who have been out of the workforce for a long time often have to re-enter it in junior or entry level positions.

Third, sometimes one party in a marriage may carry all of the debt in his or her name. Much of the debt may have been used by the other spouse. There is nothing worse than getting a divorce and then finding yourself having to pay your spouse’s debt.

Legal protections may result in the party who has the weaker financial positioning receiving support payments, being awarded the house, having the other party take responsibility for the debt, but this can take years. Also, the legal fees that compound over the course of a divorce may end up being more than the debt that was owed to begin with.

We work with marriage counselors, family therapists and even family lawyers to help their clients come up with post-divorce financial strategies.

If you have a client who needs help or if you would like to host a WeCare day where we can come out and speak with your clients/members about coping with the financial aftermath of a divorce, please email me at kgoldenberg@debtcare.ca, call 416-907-2582 ext 2587 or visit www.debtcareservices.ca.

About admin

Karen Goldenberg is the Director of Community Outreach at DebtCare.