What Are The Consequences For My Spouse If I Declare Bankruptcy

2014-07-02

Martine Lessard

Your bankruptcy does not automatically lead to the bankruptcy of your spouse. The fact that you are married or living common-law has no effect during bankruptcy. It is mostly your shared assets and debts that may have consequences for your spouse. Here is an overview:

  • Credit card, bank loan and bank account: If your spouse possesses a credit card that is associated with the same account as yours (whether he or she is a co-owner on the card or an additional card holder), he or she will be responsible for the entire balance of the credit card (and not for 50%). The same applies for a debt, as a personal loan or a line of credit, that he or she has endorsed (we use the terms co-borrower, co-signer, endorser and guarantee). Your spouse will also be responsible for all overdrafts on a jointly-held bank account. In the majority of cases, the creditor will accept the endorser continuing to make payments under the same conditions. You might be tempted not to divulge a joint debt in order to protect your spouse. Be aware that this constitutes a false declaration and can have consequences on your bankruptcy discharge.
  • Property: If you are a co-owner of a building along with your spouse, he or she preserves their rights to the building in question. Nevertheless, following the valuation of the building and mortgage balance, it is possible that the property management company would ask your spouse to purchase your part. In certain cases, the spouse does not have to make any contribution.
  • Vehicle: If your vehicle is financed (purchased or rented), in the majority of cases, you will be able to keep it. If your spouse endorsed your car loan, there will be no consequences for him or her as long as you respect the terms of your contract.

All goods belonging to your spouse (furniture, vehicles, RRSP, investments) will not be part of your bankruptcy assessment. Nevertheless, it should be noted that certain transactions made before declaring bankruptcy, such as the transfer of goods (vehicle, house) can, in certain cases, be reviewed by your property management company.

Since each situation is different, we suggest that you contact an MNP trustee who will be able to provide you with sound information.