My common-law husband of five years and I recently separated. We have no children, and divided our assets equally. He owns a small business and I have previously co-signed for a vehicle loan and line of credit for his business. Now that we are separated, am I automatically released from these loans?
Separating couples often do a good job of dividing their assets but can overlook debt obligations under car loans, credit cards, lines of credit and even mortgages. This can create serious problems.
In most cases, when two or more people are responsible for a debt, they are jointly and severally liable. This means that they are each responsible for the entire amount of the loan and the lender can pursue recovery of the entire debt from either or both parties.
This can create difficulties where one party runs into financial difficulties and is unable to make payments on the loan. A spouse who co-signed or guaranteed the loan may be responsible for repayment in full, even if they are no longer in a relationship. Despite the fact that you did not actually borrow or use the funds, you may be liable.
When separating, it is important to not only divide the assets but also to sever all joint debts. This cannot be done without involving the lender. It is just as important as the division of assets because joint debt obligations can lead to unforeseen debt and credit issues if not dealt with properly. When preparing and negotiating a separation agreement, a Lawyer will ensure that such debts are properly considered in order to protect you.