If I file for Bankruptcy what will happen to my spouse?
It is a common concern that we see, if someone files for bankruptcy that it will negatively affect their spouse. You may be worried that they will be forced into bankruptcy as well. You may worry that your bankruptcy would show up on their credit report.
So what happens?
In Canada, filing for bankruptcy does not impact your spouse. If you file a bankruptcy, your spouse does not necessarily have to file. However, if you have debts which are joint, or they are a guarantor on debts you are including in the bankruptcy, they may find that once the financial institution finds out about your bankruptcy, they are required to pay the debt which you included in the bankruptcy.
Even if you are married, or in a common-law relationship, your spouse is not responsible for your debts. Collection agents may try to coerce you into paying off, or making payments on your spouses’ debts, saying that if your spouse doesn’t pay, you are responsible. That is not the case.
You may choose to file a bankruptcy if you are having trouble dealing with your debt. However, if your spouse isn’t having a financial problem, they would not need to file a bankruptcy.
Applying for new credit
It is important to note when you obtain credit of any kind, who is on the account. If you obtain a loan, and your spouse co-signed it, it is also legally their loan. If you have a credit card account and each of your have your own cards on that account, the credit card debt belongs to both of you. In these cases, your spouse is responsible to pay the debt, not because they are married to you, but because their name is on the account.
After a Consumer Proposal or Bankruptcy, your credit may impact your ability to obtain financing jointly with your spouse, or another individual (for example, co-signing a loan for a child). You may be subject to a higher interest rate, or the bank may request a larger down payment from you. This may affect your spouse if you wish to apply for credit together in the future.
If you are worried about the effect of a bankruptcy on your spouse, contact us today. We are available for a free consultation.Contact us today for your free consulation!