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)
If my husband files for bankruptcy dose that mean I have to it dose it affect me,
Hello Melissa
You are not responsible for your husband’s debts just because you are married. His bankruptcy will not affect you unless you guaranteed, co-signed or jointly owe the debt. If you are responsible for the debt and unable to pay, I would be happy to review your financial situation in detail and discuss solutions.
Regards
Kathy
If a spouse files for personal bankruptcy and is a co-signatory on the mortgage on the family home in Quebec, will the trustee necessarily come after the spouse’s portion of the equity on the home?
Hello R.V.
In a bankruptcy, the trustee must realize on any assets that have value above secured mortgages and exemptions. If your spouse is on title of the home, the trustee would be obligated to realize on the equity above provincial exemptions. There may be an option of filing a consumer proposal. I do not practice in Quebec, so recommend you reach out to a local trustee to clarify. If you would like a referral, please email me directly.
Regards
Kathy
If i go bankrupt and have a mortgage on a newer home with my wife that is always paid. In nova scotia. Would they come after my home?
Hello Jay
A trustee in bankruptcy has an obligation to realize on the value of any assets that you may own that are not exempt. The trustee would look at the value of your house less any secured mortgages/loans/lines of credit less any property taxes owing to determine what the realizable value of the house is. If you own it jointly with your wife, the trustee would be looking at your 50% value. In most cases, you would be able to make an offer to buy back your share of the equity from your trustee. Depending on the value, you may want to speak to a trustee to see if a consumer proposal is a better solution for you. We do not practice in Nova Scotia, so I recommend you reach out to a trustee in your area.
Regards
Kathy