How is my spouse affected?
Whether your creditors will go after your spouse when you declare personal bankruptcy will depend on who owes the debt.
Filing bankruptcy in Canada will not directly affect your spouse because your debts are your debts and only you are responsible for your debts.
Therefore, yes only one spouse can file bankruptcy and it will not impact the other spouse or the other spouses’ credit rating.
How is my spouse affected by my bankruptcy?
It is commonly believed that both spouses are responsible for debt when they are married because collection agencies will threaten to collect from a spouse when calling about collecting on a debt.
A collection agency will never be able to collect from your spouse because they are not responsible for your debt if they have not co-signed on the debt.
However, if a spouse has co-signed for your debt / guaranteed the debt then your husband or wife will be responsible for the loan and must pay the loan off if you declare bankruptcy.
If your husband or wife co-signs a loan or you have a credit card on the same account then the debt is legally owned by both spouses.
In this case your spouse is only responsible for your debt because they signed for the debt.
Your bankruptcy might indirectly impact your spouse in certain ways in the future such as if you would like to co-sign a loan together.
If your spouse was bankrupt they might not be able to co-sign on a loan at a reasonable interest rate until they’ve had a chance to rebuild their credit.
Supplementary Credit Cards in Bankruptcy
A supplementary credit card is a second credit card with the same account number as the primary credit card.
If your spouse has a supplementary credit card the debt may be considered jointly held debt and your spouse will be responsible for the debt if you go bankrupt.
A supplementary credit card might not be considered a joint debt in some cases so to find out for sure if the credit card debt is jointly held by both husband and wife or common-law spouses you can ask the bank about the credit card.
If they are willing to speak to the spouse with the supplementary card the debt will be considered jointly held.
However, if the bank will not speak with you about the credit card then the bank will consider the debt separately held, which is why they won’t speak to you about the debt.
If you have any questions about this or other aspects of bankruptcy or consumer proposals you can set up a FREE consultation with our trustees, who are in every province and territory in Canada: