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How to Navigate Spouse Debt

Are you facing uncertainties or questions about managing your spouse or partner's debt? Our team understands the complexities of dealing with shared financial obligations. From understanding the implications of spousal debt to strategies for achieving financial stability, our team can offer actionable advice tailored to your needs. In today’s blog, D. & A. MacLeod Company’s licensed insolvency trustees share invaluable insights to empower your financial decisions.

A married couple reviewing their financial statements together

Common Law vs. Married Partners in Ontario

In contrast to common-law partners, married couples who are formally wed in Ontario can inherit assets from each other in the event of a spouse's death without a will.

The dissolution of marriages for legally wedded couples is also a considerably more intricate process as it involves divorce proceedings and a lot of paperwork. Conversely, common-law couples have no such obligation when dissolving their relationship. They must, however, adhere to specific regulations when it comes to dividing their shared assets.

In addition, upon the dissolution of a marriage, spouses are granted the right to seek equalization of their shared assets. Conversely, common-law partners are not automatically entitled to this right.

Should I Pay Off My Spouse's or Partner’s Debt?

Any pre-existing debt or debts accumulated by your spouse or partner after marriage will solely be their responsibility unless you choose to co-sign for them.

Understanding the Relationship Between Bankruptcy Filing and Spousal Financial Liability

You may be wondering if filing for bankruptcy impacts your spouse or how your spouse’s debt impacts your own financial wellness.

If your debts are solely in your name, your bankruptcy will only have an impact on you. However, if you and your partner have jointly acquired loans or assets, their credit report may reflect your debts or bankruptcy. Check out our personal bankruptcy services to learn more about managing debts that are solely in your name.

Even in the event of a death, divorce, or bankruptcy, you cannot escape your obligation to repay joint debt. Similarly, if your spouse or partner files for bankruptcy, the joint partner or spouse debt will remain, and you will still be responsible for its repayment.

Moreover, even if you have fulfilled your portion of the payment, as long as your spouse or partner has outstanding debts, it will still reflect on your credit score, thus negatively impacting your eligibility to apply for loans or a mortgage.


Navigating Bankruptcy During a Divorce in Ottawa and Ontario

In Ontario, the division of joint marriage debts in a divorce is not distributed equally. Both you and your former spouse are accountable for the full repayment of all marriage debts owed jointly.

For instance, if your ex-partner agrees to assume responsibility for a joint loan but fails to make the necessary payments, the bank will require you to settle the remaining debt. The terms outlined in your divorce agreement hold no weight in this matter. In the event of bankruptcy, if one partner files for bankruptcy, the other partner becomes solely liable for the entire outstanding joint marriage debt.

Further Reading:

Speak with a Licensed Insolvency Trustee in Ottawa and Eastern Ontario Today

Do you have questions regarding your spouse’s or partner’s debt and whether this may affect your credit score? We offer several debt-related solutions, including professional credit counselling.

Speak with one of our licensed insolvency trustees today to avoid bankruptcy and the need for credit repair assistance.



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