What happens If My Ex-Spouse Goes Bankrupt?

The Aftermath of Bankruptcy: Navigating the Effects on a Former Partner

The disintegration of a relationship often leads to the creation of a legally binding separation agreement to clearly outline each party’s responsibilities. This comprehensive document typically details the distribution of assets such as homes, vehicles, pensions, and furniture, along with the division of debts like mortgages, loans, and credit cards. Furthermore, it includes arrangements for child custody and care. The question then arises: What happens if my ex-spouse goes bankrupt?

Debts: Shared Responsibility

When both parties mutually agree to handle specific debts, it does not provide them immunity from these financial obligations, even if one of them fails to fulfill their part of the agreement.

For instance, if one party opts not to pay the debt, chooses to submit a consumer proposal, or declares personal bankruptcy, the creditor can demand full repayment from the other party. From the creditor’s standpoint, the details of the separation agreement or any other mutual arrangements between the separating entities are irrelevant.

Importance of Dealing with Creditors Directly

During the process of separation or divorce, it becomes crucial to engage directly with creditors and settle any joint debts, particularly any credit cards that were jointly acquired during the relationship. This helps prevent additional debt for which both parties would be accountable.

Asset Ownership and Bankruptcy

When an individual declares bankruptcy, their assets are transferred to a Trustee. For example, if a house is co-owned by both spouses and one declares bankruptcy, the bankrupt spouse’s share in the property gets transferred to the Trustee.

Although a written separation agreement might state that the non-bankrupt spouse is entitled to the bankrupt spouse’s interest in an asset, this might not necessarily bind the Trustee. The non-bankrupt spouse would then need to negotiate with the bankrupt spouse’s Trustee to acquire the bankrupt spouse’s interest in the property.

Conflicts between Bankruptcy and Family Laws

Bankruptcy laws and family laws handle assets and liabilities differently, leading to potential conflicts and unforeseen outcomes when they intersect.

Role of a Licensed Insolvency Trustee

Our team consists of experienced insolvency practitioners who understand the personal impacts of significant financial stress. Here’s what you can expect from us:


  • Personalised attention – avoid getting lost in an assembly line process.
  • Prompt responses and resolution of issues from our supportive and experienced team.
  • A thorough review of your debt solution options, including filing a consumer proposal or personal bankruptcy.
  • Direct negotiation with your creditors on your behalf once you file a consumer proposal or personal bankruptcy. This means your unsecured creditors are required to cease contacting you or continuing legal proceedings against you.


Seeking Professional Advice

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person.

The question of ‘What happens if my ex-spouse goes bankrupt?’ is a complex one with many potential outcomes. It is always advisable to seek professional advice to navigate this challenging situation and safeguard your financial future.

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