Debt is a difficult topic for any couple, but it is a vital discussion that needs to be had.
How much do you know about your partner’s finances? Do they save? Do they have a pension? Do they have an emergency fund that they can dip into in times of trouble? More importantly, do you know if they have any debt?
Talking about debt is never easy and it’s hardly a romantic subject to introduce when you’re just dating and at the beginning of your relationship. Even a few months or years into the relationship it can still be an uncomfortable subject to raise. So, when is the right time to discuss it?
When should you discuss the ‘D’ word?
Ultimately, it’s best to get the awkward issue of the ‘D’ word (debt) out of the way before you move in together and particularly before you get married. Because the way in which you get married may determine what kind of responsibility you will have over your spouse’s debt.
If you simply get married in community of property (where all assets - good and bad - that were accumulated before and after the marriage are shared) you have to remember that all debts are shared equally. In other words, if you share responsibility for your partner’s debt, the debt collectors can come after you and your assets too.
READ: Marriage and money - How to have that conversation
While love is meant to be "blind" it’s never a good idea to take on that kind of a burden, no matter how much you love someone. If you do, however, help to pay your partner’s debt before you get married, community of property (COP) may still be an option as your partner won’t be able to sign for a loan without your consent.
However, this will still be a bad idea if you are easily swayed by your partner or if your partner has the potential to conduct fraudulent acts.
“They can’t sign for a loan without your consent, but partners have been known to copy a partner’s signature,” points out PJ Veldhuizen, managing director of law firm Gillan & Veldhuizen Inc.
Should you marry a partner who’s in debt?
We live in an age where it’s almost impossible to live without servicing some kind of debt. Some of us use credit to buy a home or to study. These types of debt are deemed as good debt as the value of the underlying asset may appreciate in value or something, like a tertiary education, may increase your own earning potential. So you have to be realistic about what’s reasonable when it comes to debt.
However, it’s important to evaluate your partner’s bad debt too. This can include: car loans, personal loans, credit cards, store cards etc. Do they use their credit facilities to buy things that depreciate in value or that are consumed and disposed of quickly such as flashy cars, groceries and clothes?
If your partner has a large amount of bad debt, Veldhuizen is of the opinion that marriage should not be on the cards. And if it is, you should consider being married outside community of property or with an accrual.
“By entering into an ante nuptial contract, you exclude community of property. If you want to get married, then rather get married with an ante nuptial contract. Hide your credit card don’t share it, particularly if they have a gambling or debt problem.”
READ: How much should you spend on a wedding
What if you’re already married in COP?
If you are already married in COP then you have no choice but to accept the fact that your partner’s debt is a burden you have to carry too. However, you can do something about any future debt that your spouse may want to take and that you don’t agree with.
“You can go to the high court and sanction the registration of a post-nuptial agreement on all future credit agreements. It won’t cover pre-existing debt, but it will apply to future debt. But organising a post-nuptial agreement in court is not cheap. This is why you should consider this before you get married. It’s expensive because you are using the high court, you have to advertise [this agreement] and attorneys and advocates are involved,” explains Veldhuizen.
Debt may not be the most romantic topic to talk about, particularly if you are in a new relationship. But if the relationship is getting serious it is, unfortunately, a topic that needs to be discussed. The cold hard facts need to be presented and dealt with in the way you see fit. It would be unfair for your partner to burden you with their bad money discussions (and vice versa), but if you’re committed and have a plan to get out of the debt it could also make your relationship stronger.
Veldhuizen points out that therapy may be necessary to address debt problems and gambling habits.
“Ask your partner to think about getting therapy. You can choose who you marry but there is nothing more unromantic than debtors court. Something like an ante nuptial contract is there to protect both parties,” he adds.