Does Filing for Bankruptcy in Canada Affect My Spouse?
Filing for Bankruptcy in Canada & Your Spouse
Bankruptcy proceedings in Canada do not impact your spousal partner directly.
Debts are your property and you, solely, are responsible for their repayment.
In the event that you declare bankruptcy, you get your debts discharged.
Before and during the process, your spouse is in no way responsible for your debts.
It is a common belief that due to the fact that you are in a marriage, you are responsible for the debts of your partner.
This is false.
However, collection representatives will often intimidate you by saying if you don’t pay, they will pursue your spouse.
Understand that this is a form of intimidation and they have no legal recourse against your partner.
Of course, there are exceptions.
In the event that your partner co-signed for your debt or in any way guaranteed it, they are responsible.
It makes them legally party to the loan; and, if you default on payments, they are required to issue them.
In fact, in the event of failed payment, the creditor can demand your spouse pay in full.
This is true of joint credit cards, shared mortgages, and joint car loans.
Bear in mind that, in the event of co-signing, it is the fact that they guaranteed the loan, not their being your spouse, which makes them responsible for the debt.
Of course, there are other impacts on your spouse of your debt.
It could make it more challenging to get joint credit in the future.
When you are in the process of restoring your credit, you may be unable to co-sign for them or get credit at all.
It can also leave you vulnerable to less desirable rates of interest.
Depending on how much you share your finances, your debt can impact your spouse.
In terms of interpersonal arrangements and financial dealings, it can put a strain on relationships.
The best route is to be upfront about your situation and pursue steps to restore your fiscal wellness.
If you are looking into bankruptcy and want to know all aspects of how this could impact your spouse, reach out to a local Licensed Insolvency Trustee for actionable, objective advice.