My Spouse Wants to Declare Bankruptcy and I Don’t, What Are Our Options?

Navigating The Complex Terrain When Your Significant Other Wants To Go Bankrupt And You Don’t

When one half of a couple is contemplating bankruptcy, it can lead to a myriad of questions and worries for the other half. What will be the impact on shared assets? How will it affect the non-filing spouse’s credit rating? What happens to joint liabilities? “My spouse wants to declare bankruptcy and I don’t, what are our options?” – if you find yourself in this predicament, this article will help to demystify the process and enumerate the potential outcomes.

1. Unraveling The Misconceptions About Spousal Debts

Debts in a marriage are often thought to be a shared responsibility, but this is a common fallacy. Despite being in a marital bond, debts remain an individual burden, unless you’ve co-signed or provided a personal guarantee for the debt. This means that if your spouse’s debt is solely in their name, their bankruptcy should not impact you or your credit rating.

2. The Impact Of Bankruptcy On Joint Debts

If your spouse decides to pursue bankruptcy, the repercussions on you will hinge on the extent of your joint debt. If your shared debts are secured, such as a mortgage or car loan, you may not feel much of an impact, as these loans are typically continued to be serviced during a bankruptcy.

However, the situation becomes more complicated if you have co-signed or personally guaranteed any of your spouse’s unsecured liabilities. While your spouse will be shielded from unsecured creditors once they file for bankruptcy, this protection does not extend to you. The creditors can continue to pursue you for the debt until you either repay it or choose to file for bankruptcy or a Consumer Proposal.

3. The Pros And Cons Of Joint Bankruptcy Or Consumer Proposal

If you have substantial unsecured joint debts, you may want to consider having your financial situation evaluated by a Licensed Insolvency Trustee alongside your spouse. It’s possible to file a joint Bankruptcy or joint Consumer Proposal, but only under specific circumstances – your debts need to be “substantially the same,” and it must be in the best interest of both you and your creditors.

Alternatively, one spouse can file for Bankruptcy and the other for a Consumer Proposal. Both options offer protection from unsecured creditors, but the processes and responsibilities involved are quite distinct.

4. The Implications For Shared Assets

When a person files for bankruptcy, their assets are transferred to the Licensed Insolvency Trustee, subject to provincial exemptions. If there are no jointly held assets, there shouldn’t be any issues. Your assets, as the non-bankrupt spouse, remain outside the trustee’s purview.

However, the trustee is obligated to liquidate the bankrupt individual’s share of any jointly held, non-exempt property. In some cases, the bankrupt spouse may be able to repurchase equity in property that would otherwise be liquidated by the trustee.

5. The Potential Benefits Of A Consumer Proposal

If there are shared assets at stake, the spouse considering bankruptcy may want to think about filing a Consumer Proposal instead. This process protects assets and only requires periodic payments and two debt counselling sessions, making it a potentially more attractive option for some.

6. The Importance Of Making An Informed Decision

Navigating the murky waters of bankruptcy and debt can be stressful, but it’s crucial to remember that everyone deserves a second chance. If your spouse is weighing up options to tackle their insurmountable debt, consider attending a Free Confidential Consultation with a Licensed Insolvency Trustee together. This can help both of you understand the available options and alleviate concerns about the potential impacts of bankruptcy or a Consumer Proposal.

7. The Positive Outcome: A Financial Fresh Start

Easing the financial burdens can lead to better communication, more shared decisions, and a renewed ability to enjoy the aspects that make a relationship worthwhile. A Licensed Insolvency Trustee can guide you through all your debt options and help you make an informed decision on the best way forward, both individually and as a family unit.

Bankruptcy is a complex process, and every situation is unique. If your spouse wants to declare bankruptcy and you don’t, understanding your options is the first step towards making the right decision for your family. Remember, it’s not just about surviving the present – it’s about paving the way for a stable and secure future.

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