An insolvent debtor can file an assignment in bankruptcy to obtain relief from their debt.  Many debtors that I consult with at a free, initial assessment are concerned about how their bankruptcy will affect their spouse. The act of you filing a personal assignment in bankruptcy will affect your spouse in the following circumstances:

  • Filing a bankruptcy will only provide relief to you. If your spouse guaranteed, co-signed or is jointly liable for the debt, they will still be responsible to pay the debt.  They will have to deal with the creditor directly to make payment arrangements to ensure that their credit rating is not negatively impacted. Your spouse is not responsible to pay your debts just because you are married; they must have signed on borrowing or obtaining the credit.
  • The Trustee must realize on your assets that are not exempt or fully encumbered. If there are assets that are jointly owned with your spouse (like a house), the trustee has to realize on your share only.  Your spouse’s share of any assets will not be touched by the trustee.
  • You are obligated to submit Monthly Income and Expense statements reporting the family income and expenses. Your spouse’s income will be reported on this report and may affect the surplus income payment that you are required to make.
  • If you have transferred assets to your spouse within the last five years, the Trustee may be able to attack and overturn the transfer for the benefit of your creditors.
  • The bankruptcy process is rehabilitative, and you will be required to attend two counselling sessions on budgeting, money management and rebuilding credit. Your spouse is not required to attend these sessions with you, but you might find it beneficial for them to attend so you can both contribute to your financial fresh start.

Your spouse is welcome to attend any meetings with the Trustee to ensure all concerns are addressed.  Please feel free to reach out to me with any questions.

By Kathy Lenart Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)