Does Filing for Bankruptcy Impact My Spouse?
Individuals who consider filing for bankruptcy in Cornwall, Kingston, Ottawa or Pembroke often wonder about the possible effects on their life, not to mention their families—and, more specifically, their spouses.
While some couples decide to merge all aspects of their finances together upon marrying, many couples continue to make separate purchases in only one of their names. This could act as a means of protection in the event that one spouse considers filing for bankruptcy, but the potential impact on the other party can be complex.
Buying a home with both names on the ownership would mean you are both tied to the mortgage debt. Co-ownership translates to the spouse filing for bankruptcy possibly being required to liquidate his or her share in order to pay creditors. Therefore, the other owner must either purchase the other share or sell the home for what would be left of the equity. Although individual credit cards are considered separate debts, joint credit cards are not discharged in a bankruptcy and the remaining card holder is still responsible for paying them.
Some of your debts are discharged when you file for bankruptcy in Cornwall, Kingston, Ottawa or Pembroke, but your spouse will continue to be responsible for any of the ones you have together. All debts connected him or her remain. The spouse who does not file for bankruptcy must still pay off the debts to which their name is tied. On the plus side, since credit ratings are affected by bankruptcy, your spouse’s credit should not suffer. If you do notice an impact, however, it is worthwhile to consult with a credit reporting agency to either clarify the issue or correct it.
In the event that you share practically all of the debts with your spouse, it may be necessary to file for bankruptcy together to get a fresh start without owing significant money to your creditors. On the other hand, if you are both struggling with many individual debts, it would likely be more helpful to determine whose debts are greater to avoid having both individuals’ credit scores negatively affected by filing a joint bankruptcy.
Only non-exempt assets belonging to the individual who files for bankruptcy can be liquidated to pay off their required debts before they are discharged. Each province has its own bankruptcy exemption limits, however, so it is important to check with your licensed insolvency trustee.
Regardless of what collection agencies may say, you and your spouse are not responsible for each other’s debts. Your husband or wife is only invested from a financial standpoint if he or she is a co-owner or guarantor of your debt. The most significant impact on your spouse will come from your inability to co-sign loans or obtain credit for a while after filing for bankruptcy, or you may incur greater interest rates because you are now considered a greater risk to lenders.
We Can Help
At D. & A. MacLeod Company Ltd. we can help you understand your circumstances better and review the best scenario for you and your spouse. However, just like the credit of your spouse is not affected by your bankruptcy and they are not required to sell his or her own assets, so too are his or her debts not discharged when only you file for bankruptcy in Brockville, Kingston, Ottawa or Pembroke. For the purpose of a bankruptcy, any assets or debts you have individually are completely separate from one another. Call to learn more at 613. 236.9111 Let our 65 years’ experience provide solutions and results.