Question: I will try to keep my question as short and concise as possible. Together my ex and I have $50,000. in credit card debt that has to be dealt with asap. Spousal support is currently before the courts at this moment. I am waiting for a call to a job that will be 6 days a week. I am thinking about offering through my lawyer (in an effort to keep my house, which is currently in both of our names)to take on all of the credit card debt in exchange my ex signs off on his share of the house. Would I be eligilbe to file for a consumer proposal for this amount? I will be working 6 days a week and I will be getting a spousal support amount of $400/week so the income on my behalf will be available. Is this at all do-able? I really do not want to lose my house!!!! Please advise, Laurie.
Answer: You are raising a number of possible scenarios that are reasonably complicated, so we would strongly recommend that you meet with a licensed Canada bankruptcy trustee to review your specific situation. Here is a general answer:
Yes, you can file a consumer proposal for $50,000 in credit card debt. Yes, you can negotiate with your ex that you take on the debt, and you get to keep the house; that’s a negotiation between you and your ex. However, here’s the key point:
You are separating from your ex, not from your bank. So even though you agree to take on the credit card debt, the credit card companies may not necessarily agree to remove your ex as a co-signer on those debts. They will only take his name off if your income and credit rating is sufficient for you to qualify on your own. Similarly, they may not agree to take his name off as a co-signer on the house mortgage, for the same reasons. So, your plan makes sense, but the bank may not agree.
The second problem is this: if the bank and credit card companies and your ex agree to take his name off all of the debt, the banks and credit card companies might be quite upset if you then immediately file a consumer proposal. Today they have both of your names on the debts. Tomorrow only your name is on them. The next day you file a consumer proposal, and the bank is upset that yesterday you agreed to be solely responsible for the debts, and today you are filing a proposal because you can’t pay in full. That may make it difficult to get them to agree to the proposal.
The final factor will be the amount of equity in the house. If the house has $100,000 in equity, the credit card companies won’t agree to a consumer proposal of $20,000, since that’s less than they would get if you sold the house.
A better option may be for both you and your ex spouse to file a consumer proposal, either separately or together, to deal with the credit card debts, and then negotiate with your ex as to what will happen with the house.
Again, your situation is very complicated and there are many alternatives, so you should arrange a no charge initial consultation with a licensed Canada bankruptcy trustee to review your options.