The Debt Impact From Relationship Breakdowns

We regularly meet with people whose debt began, or worsened, during a separation. Even when both former partners are trying to be fair, separation almost always changes the financial picture. Some common challenges we see are:

1. The Cost of Maintaining Two Households

Expenses that were once shared, such as rent/mortgage payments, utilities, groceries, and transportation, suddenly double. Many people find themselves having to cover these costs before they have been able to arrange their finances to accommodate them. What starts as a temporary use of credit to cover the gap can become overwhelming if it takes too long to find a balance or the budget is too tight to pay back the debt in the long run.

2. Legal and Administrative Costs

Separation often involves legal fees, mediation costs, or expenses related to dividing property and responsibilities. These costs can add up quickly, especially when the process takes longer than expected or involves complicated issues like custody disagreements. Though the individuals may deem it in their best interest to take on debt to fund these costs, it does not always lead to a result that puts them on the financial footing to pay it back.

3. Income Disruption

Sometimes people need time off work to manage the emotional and logistical aspects of separation, particularly where dependents need extra support during this time. Others may lose access to shared income or benefits. When debt is taken on in order to pay the bills, even a temporary reduction in income can create long‑term financial challenges.

4. Child Related Expenses

Separated parents often face new or increased costs related to childcare, setting up a suitable living space for children in two homes, or even counselling. Understandably, parents will go to great lengths to manage the impact on their children during a separation, including taking on debt. What is seen as an investment in their childrens’ future, though, can add up to unsurmountable debt.

5. Debt That Was Previously Shared

Joint credit cards, lines of credit, or loans can cause complications during a separation. Even if one person agrees to take responsibility for a debt, creditors may still pursue either borrower if payments are missed. And the financial strain on both parties sometimes means that even those with the best intentions are unable to continue to service their fair share of the debt.

Sometimes, the financial difficulties begin well before the relationship ends. Financial stress is increasingly recognized as a factor that contributes to relationship strain and even breakups. Rising living costs and financial pressure can affect relationship stability, with many couples citing money stress as a driving factor in decisions about separation. Some reasons that money causes relationship conflict we see are:

1. When the situation gets rough, it can be tempting to hide how bad it is from a partner, which in turn causes communication and trust issues.
2. Missing payments or juggling payments to keep creditors at bay is stressful, and puts people on edge.
3. One partner may take on more responsibility for bringing in income or managing the finances than the other, which can result in resentment.
4. When tensions are high, emotional spending or coping‑related expenses can exacerbate the situation by adding financial troubles to the pile.

In our experience, people don’t intentionally take on more debt than they can reasonably hope to repay. In fact, most people express shame that their financial situation spiraled during a separation. These are the factors that we see causing things to reach a breaking point:

1. Lack of control over the situation

You can’t always control how quickly expenses increase, how long legal processes take, and your former partner’s financial decisions.

2. Emotions cloud judgment

It’s hard to overstate how emotionally difficult the transition can be during a separation. It’s not uncommon for someone to take their eye off the ball regarding finances when they’re dealing with a heavy emotional situation.

3. Lack of coordination

To minimize the financial impact of a separation, the parties need to communicate with each other and work collaboratively to manage expenses and ensure financial commitments are being met. This isn’t always easy, especially when a breakup is not harmonious.

Relationship breakdowns are one of the most common reasons people seek financial help. What some might judge as a personal failure is in reality a major life change that affects almost every part of someone’s financial world, and not everyone is in a situation that lends itself to managing those changes effectively.

What To Do If You’re Struggling Financially After a Separation

Managing your finances during or after a separation won’t be easy, but there are some things you can do to put yourself in the best possible position:

1. Get a Clear Picture of Your New Budget

List your income, expenses, and debts based on your current situation, not what things looked like before the separation. If possible, work with your former partner to understand their budget also, to understand how it may affect you.

2. Prioritize Essential Expenses

During a separation, it can be tempting to keep spending the way you used to in order to minimize the changes to everyone’s lives. However, that may not be realistic. If you have to cut expenses, focus on the essentials like housing, food, and utilities first and then determine what’s left for debt payments and non-essentials.

3. Seek Guidance When Needed

Though it can mean added expenses, one really can’t underestimate the value that comes from good advice about things like your legal rights, tax implications, and options for managing your debts. Finding the right advisors can save you a lot of trouble down the road, and increase your financial stability in the long term.

Relationship breakdowns are emotionally exhausting, and the financial impact can make an already difficult situation feel overwhelming. Finding support can help you move forward with clarity and confidence.

In particular, if you’re dealing with overwhelming debt after a separation, there are legal tools designed to help you reset, and professionals who can guide you through your options in a calm, supportive, and judgment‑free way.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the Alberta region. We regularly help individuals who are dealing with a separation consider their options for dealing with their debt. If you'd like to explore the options, please reach out to us. Consultations are free.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.