The COVID-19 pandemic has put tremendous strain on many romantic relationships. However, at a time when many households are struggling with a loss of income or reduced paychecks, finding out about a partner’s hidden debt could prove to be the last straw.
The impact of financial infidelity on a relationship can be devastating. Ask anyone who woke up to that unromantic surprise about their partner carrying a secret debt for years.
While debt deception may not create widespread media sensation like an extra-marital affair, it’s more common among Canadian couples than is believed. A pre-pandemic study conducted by Rates.ca found one in five Canadians were committing financial infidelity by keeping a secret around money. As many as 17% admitted the monetary value of their secret debt exceeded $10,000. A similar study conducted by CreditCards.com found debt deception was more prevalent in millennials, 51% of whom confessed to having pulled the wool over the eyes of their significant other in money matters.
It’s the Thought That Counts
A secret could mean hiding from your spouse the $100 you owe a friend from a bet. It could also mean willfully concealing $50,000 racked up in debt owing to an extravagant lifestyle. But the trouble with fibbing isn't just about the size of the debt.
Regardless of the magnitude of the mendacity, a violation of trust could have serious consequences, including divorce. Not to mention, the creditworthiness of one partner can take a beating because of financial indiscretions of the significant other, especially if the couple has combined their finances.
However uncomfortable it may feel, the idea of frequent and frank discussion about money has undeniable merit. “Ideally, there should be no hidden debt in a relationship,” says Tina Tehranchian, a certified financial planner and senior wealth advisor at Assante Capital Management.
The amount that could be a deal-breaker would depend on the tolerance of each partner for having secrets of any kind in a relationship, she adds.
It may be pointing out the obvious to say honest communication about money is critical to a happy relationship, but it bears repeating.
“Usually, partners keep their debt a secret because they are ashamed of having taken on a debt,” says Tehranchian. “If the debt was incurred during the relationship without the knowledge of the other partner, then they have also breached the trust and confidence of their partner, which is another reason for being ashamed and wanting to hide the debt.”
Look Before You Leap
If you're planning to enter a long-term relationship, don't keep a detailed talk about finances off the table. Being open with your partner about an unpaid debt is critical. Ideally, bring it up before making a long-term commitment. “Solid relationships are built on trust and confidence and being open and honest from the start of the relationship helps build a solid foundation for a long-lasting union,” Tehranchian contends.
Hiding debt may make one partner feel like they look better in the eyes of the other “but it exposes the entire relationship to the risk of breaking down due to abuse of trust,” she adds.
Have the Talk
Don't leave it too late in a relationship to talk about finances. Provide full financial disclosure before getting married and merging your finances with your partner. “Being open and honest about one’s finances is a good strategy both at the beginning of a relationship and as an ongoing policy,” Tehranchian notes, stressing “no one wants to be in a relationship where their partner lies to them about their finances, no matter the reason.”
Also, keep the conversation going. Set limits and discuss goals together, and do a joint financial checkup at least once a year to find and fix any issues.
'Better safe than sorry' is a good policy to follow, especially when it comes to finances. To that end, drawing up a marriage contract, or a pre-nuptial agreement, wouldn't be a terrible idea. It may not be the most romantic way to start a life together, but it could provide an effective security blanket when relationships sour over a partner's undisclosed debt.
“If you have an iota of a doubt that your partner may be marrying you because they are more interested in your money than you, then you should get a marriage contract or a pre-nuptial agreement to eradicate those doubts,” argues Tehranchian.
The longer people wait to disclose their secret debt, the harder it becomes to do it, and the more distressful the consequences. The only way to get around it is through it.
Life after Debt
Sooner or later, the truth catches up. “Unfortunately, when the truth finally catches up with you, it is too late and the foundation of trust in the relationship would be tarnished no matter how you try to explain the situation,” Tehranchian cautions.
The road to redemption may be long, but the following steps may repair some of the damage done to your relationship, and help you sleep better at night.
Fess up: The loss of trust in a relationship will likely take longer to repair than your credit history. So, owning up to your misdeed could be a good place to start. And the sooner the better. “It is always better to come clean as soon as possible and decide on a strategy to eradicate the debt together with your partner,” says Tehranchian, stressing “this could actually help solidify your relationship.”
Repay, repair and rebuild: As soon as you have the great confession out of the way, it's time to create a repayment plan to defuse the debt bomb. “Partners can and should work together to make a repayment plan and discuss the debt with their financial advisor and come up with the best strategy to eliminate the debt,” assert Tehranchian.
There are also online debt repayment calculators that can help evaluate various strategies for paying off debt.
Hidden debt could cause more serious problems than being turned down for a mortgage. “It is always better to voluntarily disclose your financial infidelity than to be found out,” says Tehranchian. “Your partner is more likely to understand that as a human being you made mistakes and are now being truthful about it and want to have no secrets.”
But if you keep it a secret until you are exposed then it would be extremely difficult to regain your partner’s trust, she warns. Bad debt may be difficult to fix, but some measures can be taken to remedy the problem. The same can't be said for fixing a broken heart or home.
