The initial goal of any person who is facing debt is usually to ensure that their family won’t face any trouble if they file for a bankruptcy, particularly their spouse. The question regarding the impact of a bankruptcy on the partner is also commonly asked by those who are suffering from a debt, and looking for the right options. Let’s see what the law has to say about it.
Joint Debt
It is assumed that since you are married to that individual, they are logically responsible for your debts as well. However, this is not how it works in Canada. Your spouse is only accountable for your debt if it was acquired jointly under your names.
So, if the wife signed for a credit card before marriage, the husband is not lawfully responsible for the debt on those credits just because he married her. But if there is a mortgage or a joint credit card that you have signed together after the marriage, then both of you are liable to repay the debt.
One Filing Without the Other
The option to file for bankruptcy without the other partner is also provided. If a wife files bankruptcy without her husband, it means that the wife has discharged her debts. However, the husband still owes money in a jointly held debt. The credit report of the wife will show bankruptcy in it, while the husband’s credit report will remain the same.
In case where the husband’s credit report is damaged with bad ratings because of the wife’s bankruptcy, the responsible agency should be informed, and the issue needs to be resolved on an immediate basis. In conclusion, the credit report of the spouse who is not filing for bankruptcy should remain the same, and changes will only take place in the credit rating of the spouse who is filing for the bankruptcy.
Non-Joint Debts
As the name suggests, these are debts that you haven’t co-signed with your partner, therefore it will not affect the credit report or the rating of your partner, nor will they be in debt because of your debt. The balances are entirely your responsibility; however it may concern your spouse indirectly later on.
If you and your spouse are considering buying a house after the discharge from the bankruptcy, you might face difficulty in qualifying for the mortgage. The reason is that bankruptcy is visible in your credit report; therefore it will be challenging to buy a house together.
Supplementary Credit Cards
When an individual applies for a credit card, they also get a credit card for their partner. If your husband or wife signs up for that card, then they are also legally responsible for the complete balance owed. It doesn’t matter if the account is in your name. Hence, it is essential to check your debts to make certain that your spouse is not in any of the joint accounts, before declaring bankruptcy.
Divorce or Separation
Just like marriage cannot make the other partner liable for the non-joint debts, the divorce doesn’t remove the joint debts either. You can divide your property, but you cannot divide the debt. Both the parties will be equally responsible for repaying that debt, irrespective of the legal separation or divorce agreement.
To understand the complexity of the matter where spouses are involved, you can look for the best counselors, who will inform you about the other alternatives to make the process of bankruptcy simpler for you.
