A common concern that we hear frequently is related to filing personal bankruptcy when married. Many people wonder about what will happen to their spouse if they file for bankruptcy. Will your spouse become responsible for your debts? Will he or she lose assets? What will happen to his or her credit rating?
The answers to these questions depends on each person’s specific situation.
However, in simple terms, each person’s debts are their individual responsibility. If you take out a loan yourself and do so alone, this is your debt. If you file for bankruptcy, this debt will not affect your spouse in any way. If all of your debt is separate from your spouse, then he or she will not be affected by your bankruptcy. Some people believe that getting married means that all debts instantly become shared. This is not true.
If your loans are joint loans (meaning a loan that your spouse has co-signed with you) then he or she will be 100% responsible for your debt if you file for bankruptcy. Joint debts usually include joint credit cards, joint lines of credit, and other such debts.
Supplementary credit cards (where your spouse has a separate credit card on the same account) may be considered joint debt in most cases. You will need to speak with your credit card company to clarify this situation.
Your bankruptcy should not directly affect your spouse’s credit rating, as long as he or she is able to make all debt payments that he or she is required to make. However, this is another situation where you will need to seek clarification. Speaking with a Licensed Insolvency Trustee can help you understand the exact implications of filing for personal bankruptcy for both you and your spouse.
Joint Debt in a Divorce
When a couple files for divorce, most of their assets are split up between the two individuals. However, this is not true for joint debt. Even after a couple separates or gets divorced, both individuals are still responsible for the joint debt that they entered into together. In most cases, they must share this debt until it is paid off. Even in situations where the separation agreement addresses that the debt is to belong to one person, this may not be binding. Unless the creditors have agreed to the terms of the separation agreement, this joint debt will likely remain the responsibility of both people.
Finding Out Information on Personal Bankruptcy
Personal bankruptcy is a legal process that is designed to help “honest yet unfortunate debtors” eliminate most (if not all) of their debts. If you have any questions about this process or if you are unsure as to whether or not bankruptcy is an option that you should consider, it often makes sense to speak with a trustee.
A trustee is a trained professional and licensed by the federal government. Trustees are able to review financial situations and provide individuals with information on the financial options that are available to them. All trustees offer a free consultation where they can review your particular situation and let you know which options are possible. Bankruptcy is one option for getting out of debt trouble, but it is not the only one. Trustees are bound by a strict code of ethics and they are required to present you with all possible options, not just the ones that the trustee provides.
If you are concerned about what filing personal bankruptcy when married will mean for your spouse, having a trustee review your situation is a good idea. He or she will let you know important details before you decide whether or not you wish to file for bankruptcy.
As mentioned, personal bankruptcy is not the only option if you are having trouble paying your debts. When you meet with your trustee, he or she will inform you of all of the options that are available to you. Other options include debt settlement, debt consolidation
and consumer proposal
. These options may or may not apply to you. Each situation is unique and there is no “one size fits all” choice that works for everyone.
Speaking to a trustee can help you understand more about filing personal bankruptcy when married as well as the other available options.
Filing for Personal Bankruptcy in Ontario