If you have a partner, you might wonder what effect filing for bankruptcy could have on them.
And while there are some exceptions to the rule, it’s important to know that when filing in Canada, it won’t directly affect your spouse.
Despite certain debts being a joint responsibility, your personal debts are yours.
Although many people believe that because you’re together (or married), you’ll be equally responsible for the debts, but this simply isn’t the case.
And although some collection agents will use this as an excuse to get them to pay, it’s not technically true.
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The Affect on Your/Their Credit Rating
If your debts belong solely to you, then filing for bankruptcy will have no impact on your spouse’s credit rating.
However, if you have joint debts, then both of your credit ratings will be affected.
Once bankruptcy is filed, you’ll both have a low credit score, which could influence both of your abilities to get a loan in the future.
The Impact of Supplementary Credit Cards
One of the most common queries that people have is if they have supplementary credit cards and their partner has to file for bankruptcy, how will this affect them?
Many couples have supplementary credit cards.
Using the same account number as the primary card, they are a popular way of spreading costs and sharing payments.
However, because of this, your spouse will be considered jointly responsible for any debts that have been accrued under that account.
As they have co-signed on it, you’ve both knowingly given the commitment that you will pay off the credit card every month.
A way of checking if your spouse will be liable for the credit card payment if you’ve become bankrupt is for them to contact the credit card company.
If they then state that they can’t discuss the payments with them as it’s not signed under their name, they won’t be responsible for the debts.
This issue is the same if you have a joint debt – such as a loan.
You don’t even have to be married for this to happen – you could be separated, divorced or simply common-law.
As long as you’ve co-signed the loan together, you’ve provided a guarantee to cover the payments.
Owning Your Own Home Vs Owning a Property Together
If you own a home by yourself, then your bankruptcy won’t affect your partner.
But if you both own a property together, then your creditors are entitled to their agreed share of the equality within the home.
This often leads to people having to sell their property in order to give their creditors the money that they owe them.
Of course, this is not always the case.
Certain provinces will have bankruptcy exemption limits.
When a property falls within this, then your property won’t be put at risk.
Of course, if it’s over the exemption limits, then you may have to sell a portion of the assets in order to cover the debt.
Your Spouse’s Assets
When a creditor wants to collect the payments that are owed to them, they will often only seek high-value assets.
Simple items, such as furniture or household possessions aren’t typically used.
Instead, they will look for joint items like properties or similar that will cover the debt in full.
Surplus Income Payments
If you earn more than what the bankruptcy guidelines allow, you can make surplus income payments to help cover the debt.
Part of an Income Payments Agreement, although both your’s and your partner’s incomes are taken into account, the non-bankrupt spouse isn’t liable, unless of course, it’s a joint debt.
Are You Looking for Debt Relief Services?
Although debt is often personal and not shared between spouses, it’s worth determining how your partner could be affected from the get-go.
So if you’re filing for bankruptcy and need advice into debt relief, then you’ve come to the right place.
To find out more, simply get in contact with one of our local and licensed trustees at (877) 879-4770 or drop us an email by filling out our easy to use online form.
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