AFTER THE LOVE IS GONE… - Debt could be with you for longer than your Valentine

IT’S nearly Valentine’s Day! Love is in the air, every school is having a programme – en elke kind moet rooi dra!

This is also the time when people do stupid things, like take out loans to buy expensive gifts for their partners (within and outside of marriage).

Some even go as far as buying homes and vehicles and registering them in the partner’s name – with no guarantee that their relationships will last.

​Can you imagine struggling to pay off a house or car that your ex is enjoying with their new love?

​Or paying off your credit cards and personal loans, used for expensive gifts, romantic dinners and trips with someone who has moved on to “the new love of their life”

​This February, the National Debt Counselling Association (NDCA) is urging consumers to look beyond romantic gestures and consider the long-term financial implications of relationship choices - and how the wrong ones can lead couples into serious debt trouble.

NDCA chairperson René Moonsamy said: ​“People don’t always realise how undisclosed debt, credit obtained on behalf of others, or credit taken out during a previous relationship can cause tension between even the most lovestruck couples.”

​She says the first thing to understand is that the legal liability for repaying borrowed money lies with the person whose name is on the credit agreement.

This means that if you apply for credit on behalf of a loved one, you remain responsible, even if the other person has agreed to make the repayments.

​Moonsamy warned: “Credit follows the contract, not the relationship, and emotional agreements between parties have no legal standing.

“If you take out credit on behalf of someone you love and they miss repayments, it will negatively affect your credit record.

“This may limit your access to further credit or result in you having to pay higher interest rates because you are deemed to be higher risk.”

​A second consideration is that old debt and new relationships can be a toxic combination.

This occurs when debt incurred in a previous relationship follows someone into a new one.

It can strain the relationship, particularly if the person who owes the money attempts to hide it and their partner finds out.

​An example of how this can happen is where credit is granted based on a combined household income.

If the relationship ends and one of the partners stops paying their share, the primary debtor is left carrying the full expense burden, financial strain and risk of over-indebtedness into any subsequent relationship.

​Another misconception is that divorce decrees remove liability.

While divorce orders may allocate responsibility between spouses, they do not bind credit providers. Where there is joint debt, both parties may remain liable, even after the relationship has legally ended.

​It is also essential to understand the marriage regime applicable in South African law, as this decides how assets and debt are treated in the event of a divorce.

​If you have not signed an ante-nuptial contract (ANC) before getting married, then you are married in community of property.

This means you and your spouse share assets and liabilities. If one partner is struggling with debt, both are affected.

​An ANC agreement means you are married out of community of property, and your assets and liabilities are kept separate.

There are two types of ANC agreements: with and without accrual.

Accrual ensures separate ownership of assets and liabilities during the marriage, while allowing for shared growth in the value of the estates.

If there is no accrual, assets and liabilities are kept completely separate, and there is no shared growth in asset value.

If you are currently in a relationship, make this the time to have a truthful conversation about your debt, credit report and view on money, especially if you plan on tying the knot.

Sarfaraaz Hamza, CEO of debt counselling company, ezDebt says that the lack of communication in marriages can often be seen when finances hit a bad patch.

He adds that when a couple realises that they are struggling with their debt and approach a registered debt counsellor, it is vitally important that they are brutally honest about their finances, especially their expenses and their debt.

Hamza said: “Often, we find that one party in the marriage is not fully aware of how much the other has been spending.

“When all the cards (and spending) are laid on the table, it can make an already tense situation even worse.

I therefore highly recommend that couples make the time and the effort to have conversations around their finances, even before they tie the knot.

Should they run into trouble further down the line when they are married – their honesty and open communication can stand them in good stead.”

​Don’t make debt in the name of love. It rarely ends well.