Facing financial hardship can be a stressful experience. It becomes more daunting when you have a spouse and you’re uncertain about how your financial decisions will impact them. One such financial decision is filing a consumer proposal. The big question many married or cohabitating individuals ask is, “Does a Consumer Proposal Affect My Spouse?” This article aims to shed light on this issue and provide a comprehensive understanding of the potential implications.
Understanding Consumer Proposal
Before diving into the implications for your spouse, let’s first understand what a consumer proposal is. A consumer proposal is a legal debt settlement agreement that is administered by a Licensed Insolvency Trustee (LIT). It is an alternative to bankruptcy, where you negotiate with your creditors to pay a percentage of what you owe in exchange for full debt forgiveness.
The Concept of Joint Debts
A crucial factor that determines how a consumer proposal will affect your spouse is whether or not you have joint debts. Joint debt refers to money borrowed by both you and your spouse, where you both have signed a legal document agreeing to share financial responsibility for the debt. This could include mortgages, lines of credit, bank accounts, bank overdrafts, or car loans.
Remember that being married or in a common-law relationship does not automatically make your spouse responsible for your debts. Each person is responsible for the debts under their name. However, if your spouse co-signed or guaranteed your debt, they become equally liable to repay the full debt if you stop making payments.
Consumer Proposal and Your Spouse
If you file a consumer proposal, it does not directly affect your spouse’s credit report unless you have joint debt. In the case of joint debt, if one spouse files for a consumer proposal, the creditors can still pursue the other spouse for debt repayment.
Dealing with Joint Debts in a Consumer Proposal
When you have significant joint unsecured debts, it’s advisable to discuss this with your trustee. Depending on your situation, it might make more sense for both of you to file a joint consumer proposal. By filing a joint consumer proposal, you can save effort and money by filing together, and once the agreed amount is paid to your creditors, both spouses are discharged from the balance of the debts. However, it’s important to note that filing a joint proposal will affect both of your credit reports.
Impact on Marital Assets
Assets owned by you or jointly with your spouse will be considered when determining a fair offer to your creditors. However, any assets that your spouse owns solely are not considered unless you recently transferred that asset to your spouse. If your spouse owns their own car or has savings or investments, these assets will not impact your consumer proposal.
Influence of Spouse’s Income on Consumer Proposal
Your spouse’s income is an important factor in the consumer proposal process. The Licensed Insolvency Trustee will review your current financial situation, including your income, your spouse’s income, and the family’s expenses. This information will help determine the amount you can afford to repay your creditors and how much your creditors will expect to receive.
Effect on Your Spouse’s Credit Rating
Your consumer proposal is reported to the credit bureau but only in your name, so it will not affect your spouse’s credit rating or their credit score. However, remember that if you have debt that you are jointly responsible for, your consumer proposal deals with your liability, meaning your spouse will have to continue to pay for the joint debt unless they also file a consumer proposal or bankruptcy.
Using Your Spouse’s Credit Card
Yes, you can use a supplementary card to your spouse’s credit card while in a consumer proposal. However, you need to understand the nature of the supplementary card. If you are liable for the credit card debt under the terms of the credit card agreement, that debt will also be listed in your consumer proposal and your spouse will still have to pay for it.
Consult a Licensed Insolvency Trustee
If you have concerns about how a consumer proposal will impact your spouse, it’s advisable to talk with a Licensed Insolvency Trustee. They can provide recommendations on how each spouse should proceed if they both have problem debt. Every family and personal scenario is unique and requires a custom solution.
Conclusion
Understanding how a consumer proposal affects your spouse is crucial when facing financial hardship. While the process may seem daunting, a Licensed Insolvency Trustee can guide you through the process and help you understand the potential implications for your spouse. Remember, financial hardship is temporary, and with the right advice and strategy, you can navigate through it successfully.
