When two people decide to spend their lives together, it’s not just their hearts that join, it is their financial lives as well. Whether it’s taking out a bond, sharing household expenses, or managing debts, marriage and money are often intertwined.
What happens when debt becomes overwhelming during your marriage?
Debt review could be an option, but many couples wonder how it will affect their relationship and their spouse.
In South Africa, how debt affects a couple depends on their marital status. This includes being married in community of property (COP), out of community of property, or couples who are not married.
To make reading easier, you can use the table of contents. You can jump to the section you like best. You can also explore the whole blog to understand how marriage and debt are linked.
Table of Contents
What Happens to Debt during Marriage?
Marriage doesn’t just mean combining your assets, it can also mean combining your debts. Depending on your type of marriage, this financial entanglement can be more significant than you might expect.
When debt piles up, it’s important to understand how you and your spouse are legally responsible for repaying it. This can affect your entire approach to debt counselling if you or your spouse / partner need to consider this as an option.
Understanding South African Marriages
There are two main types of marital regimes: Community of Property (COP) and Out of Community of Property. Each of these types of marriages has different legal implications for how debt is managed during marriage.
Neil Roets, the CEO of Debt Rescue, says that if one partner in a marriage needs debt review, the other must too. This is because they are lawfully seen as one entity if they are married in community of property. To be identified as separate entities, they should enter into an antenuptial contract before marriage.
Marriage In Community of Property (COP)
- Debts Before and After Marriage: If one spouse has debt before marriage, it becomes part of the joint estate after they marry. Creditors of one spouse can claim from the joint estate even if the debt was incurred before the marriage. You will share all your debts and assets equally.
- Financial Decisions Impact Both Spouses: This joint estate means that all financial decisions made by one spouse directly affect the other.
- Joint Responsibility for Debt: If one spouse has debt, the other is equally responsible for repaying it, even if they didn’t contribute to the debt.
- Insolvency: If one spouse is declared insolvent, the entire joint estate is affected, and both spouses are declared insolvent.
Marriage Out of Community of Property without the Accrual
- Separate Assets and Debts: When you are married out of community of property without the accrual, your debt and assets will stay separate.
- Independent Financial Responsibility: If the one spouse enters into debt review the other’s finances will not be directly affected. This type of marriage allows for much more financial independence.
Marriage Out of Community of Property with Accrual
If you are married out of community of property with the accrual, means that the assets you each brought into the marriage remains yours. For example your car, if you own a home in your name, will remain yours.
- Individual Debt: If you have debts in just your name, only your personal finances will be restructured while you are under debt review. Your spouse’s finances will not be affected.
- Joint Debt: If you have debt together, for example you bought a house together, both of you will be placed under debt review.
- Equal Division: All the assets acquired during the marriage will be split equally if you ever divorce or separate.
The Impact of Debt Review on Your Spouse
Debt review can offer a legal structured solution to managing financial challenges within a marriage, depending on your marriage type.
How does Debt Review affect Your Spouse?
Here’s how debt review can impact your spouse based on your specific marital arrangement:
Married in Community of Property (COP)
- Debt Review: If one spouse enters into debt counselling, both parties must participate because their debts are considered part of a joint estate. This means that both must agree to enter into the process and jointly work on repaying the consolidated debt. Creditors view the couple as a single financial entity, so both must comply with the debt review terms.
- Protection During Debt Review: Although this may feel restrictive, the upside is that both partners receive protection from creditors. Debt counselling ensures that creditors cannot repossess assets like the family home or car, as long as the agreed payments are made.
Married Out of Community of Property
- Unaffected Credit Record: In out of community of property marriages, the spouse not entering debt review remains unaffected by the process, at least in a legal sense. Their credit record and assets stay intact.
- Household Budget Affected: However, they may still feel the indirect effects of their partner’s debt review. For example, the household budget might be tighter, and the spouse may need to take on additional financial responsibilities while their partner goes through the debt review process.
Non – Married Couples
Unmarried individuals who share financial obligations, like a bond, must go through debt review together. It is not possible to put only part of a property under debt review.
What are the Benefits of Debt Review for Married Couples?
For married couples, the main benefit of debt review is that it offers legal protection from creditors. Once you are under debt review, creditors can no longer take legal action against you, which means no repossessions of your assets, no harassing phone calls, and no lawsuits.
Other benefits include:
- Single, reduced monthly payment: Instead of trying to make multiple debt payments, debt review consolidates your debts into one manageable monthly payment.
- Protection of assets: Your home and car are protected from repossession while under debt review.
- Improved financial health: By restructuring your debts and paying them off over time, debt review gives you the chance to restore your financial situation and avoid further debt problems.
- Debt Free: Completing debt review means you’ve paid off all your debts, restored your credit score, and can once again take control of your financial life.
For a greater understanding of the debt review process, take a look at our comprehensive guide: Everything you need to know about Debt Review.
5 Tips for Couples Going Through Debt Review
1) Communication is Vital
Being honest about your financial situation will help in building trust in your marriage and ensures that both of you work together as a team to resolve your debt.
2) Realistic Goals
Sit together and create a realistic budget that reflects your new financial reality. By doing this you can set achievable goals and celebrate small milestones.
3) Do research regarding Debt Solutions
Money management isn’t easy as we all struggle to remain afloat with inadequate salaries, inflation and high unemployment. Learning about better spending habits as well as how debt review can assist you both, empowers you to avoid future financial pitfalls.
4) Make an appointment with a Debt Counsellor
A reputable and registered debt counsellor will provide both of you with guidance and support regarding the entire debt review process. At Debt Rescue we offer a free no obligation assessment.
5) Only focus on your Future
Debt review is not permanent. It’s a solution that will ensure you are financially stable once you have completed the process. The time you spend under debt review depends on how much debt you have. The goal is to make you debt-free in 3 to 5 years.
Take the First Step Toward Financial Relief
Don’t wait until your financial situation becomes unmanageable. The sooner you reach out to us, the sooner we can protect you from legal action and give you the financial relief you need.
If you’re feeling overwhelmed by debt, know that we’re here to help you every step of the way.
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