A Consumer Proposal, a legal agreement set up by a Licensed Insolvency Trustee (LIT), is a significant financial decision that can potentially impact your spouse. This article aims to shed light on the various aspects of how a Consumer Proposal can affect your spouse, from joint debts to credit ratings.
Understanding Joint Debts
Before delving into the effects of a Consumer Proposal on your spouse, it’s crucial to clarify the concept of joint debts. Being married or in a common-law relationship doesn’t automatically make your spouse responsible for your debts. Each individual is responsible for their own debts. However, if you’ve co-signed or guaranteed your spouse’s debt, you become equally accountable for repaying the debt if your spouse stops making payments.
Common Types of Joint Debts
Joint debts can take various forms:
- Mortgages.
- Credit Cards.
- Loans.
- Lines of Credit.
- Bank Accounts.
- Bank Overdrafts.
- Car Loans.
Impact of a Consumer Proposal on a Spouse
A Consumer Proposal is a legally binding agreement that deals with your unsecured debts. This includes both individual and joint debts. However, if you don’t have any joint unsecured debts with your spouse, your spouse won’t be affected by your Consumer Proposal. Your creditors can’t contact your spouse for your debts.
Consequences for Joint Debts
If you have joint unsecured debts, your spouse will be expected to fully pay off that debt, even though your debt is being compromised by the Consumer Proposal. The spouse filing for the Consumer Proposal is protected from further collection actions by a stay of proceedings, but the joint spouse is not unless they also file a proposal or bankruptcy.
The Role of Your Spouse in the Consumer Proposal Process
Even though your spouse might not be directly involved in your Consumer Proposal, their financial situation will be considered during the process. The LIT will review your current financial situation, including your income, your spouse’s income, the family’s expenses, and your assets, including joint assets. This financial snapshot helps determine the feasibility of a Consumer Proposal, how much you can afford to repay your creditors, and how much your creditors will expect to receive.
The Fate of Joint Assets
In a Consumer Proposal, you retain all assets you own. Only your share in any joint asset will be considered when determining a fair offer to your creditors. Any assets that your spouse owns solely are not considered when you file a Consumer Proposal unless you recently transferred that asset to your spouse.
Potential Effect on Your Spouse’s Income
When meeting with a LIT, they will look at your financial situation, including your family income. If your household income exceeds a government-set threshold, known as the surplus income limit, your spouse’s income can impact the amount you have to offer in your Consumer Proposal.
Impact on Your Spouse’s Credit Rating
Your Consumer Proposal will not be recorded on your spouse’s credit report. Therefore, it won’t directly affect your spouse’s credit rating or credit score.
Using Your Spouse’s Credit Card
You can use a supplementary card to your spouse’s credit card while in a Consumer Proposal. However, you must ensure that you’re not liable for the credit card debt under the terms of the credit card agreement.
Consultation with a Licensed Insolvency Trustee
If you have concerns about how a Consumer Proposal will impact your spouse, consult with a Licensed Insolvency Trustee. Every personal and family scenario is unique and requires a tailored solution. They can provide recommendations on how each spouse should proceed if they both have problem debt.
The decision to file a Consumer Proposal is a significant one, and it’s essential to understand how it can affect your spouse. By understanding the process and potential implications, you can make an informed decision that’s best for your financial future. Reach out to a Licensed Insolvency Trustee today to discuss your specific situation and explore the best debt solution for you and your spouse.
