How Does Bankruptcy In Canada Affect Your Spouse?

Category: Personal Bankruptcy (17) comments

bankruptcy and your spouseAs a general rule if you file for bankruptcy in Canada it does not directly affect your spouse.  What you will find is that your debts are yours and yours alone.  However, there are some instances where your spouse may be affected.

If your spouse has co-signed, or guaranteed a debt for you

If, for example, you and your spouse have a joint (or cosigned) credit card, you each gave your commitment that the credit card will be paid in full, regardless of what happens to the other party.  So if one spouse should disappear, refuse to pay, pass away or file for bankruptcy the other spouse is still responsible for that debt, in full. If you file for bankruptcy and your spouse, or anyone for that matter, has cosigned or guaranteed a debt for you they will likely be pursued by your creditor to repay that amount.

If you and your spouse own property together

It is not always a problem if you and your spouse own property together.  If all the property you and your spouse own jointly falls within the bankruptcy exemption limits set by your province then you don’t have to worry.  However, if you own property that is over and above these exemptions, then your portion of these assets may have to be sold as part of the bankruptcy. This would clearly impact your spouse.

For example, let’s say you and your wife owned an old RV that was worth $10,000 in the current market.  This would be an asset that does not fall within the provincial bankruptcy exemptions and is lost as part of the bankruptcy. If you filed and your spouse did not, then the RV would need to be sold and 50% (or in this example $5,000) would be paid to the bankruptcy trustee and $5,000 would be paid to the non-bankrupt spouse.  Although in practice we find most people don’t have to sell any assets in a bankruptcy, it is important to understand the circumstances that this may become an issue.

For the most part your debt is separate from your marital status, as is your bankruptcy.  However, the best way to determine if your spouse is in a position where they would be impacted by your bankruptcy is to meet with a trustee. If you are resident of Edmonton or Northern Alberta I would be happy to discuss things with you directly. You can always get in touch with me at 780-435-5110 or through my for Goth & Company website.

After a quick examination of the type of debts you have and the nature of the assets you own your trustee will be able to identify any risks and explain exactly what your spouse can expect.  So my recommendation, contact a local trustee.  There will be no cost or obligation associated with simply asking questions and then you will have a qualified opinion that is based on the facts.

Category: Personal Bankruptcy |

About Barton Goth

Barton Goth, BA, MBA, CIRP is a Licensed Insolvency Trustee with Goth & Company Inc. In addition, he holds a Masters in Business Administration with a specialization in finance. Barton regularly meets with people seeking help with their debt problems and works with them to find the best possible solution.

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  1. yetunde

    Hi there,
    My sister currently owns a property with my mum, while she owns another property (a commercial store where she sells ) by herself. She is in so much financial difficulty that we are considering bankruptcy. Question is, if she files bankruptcy, will my sister be affected??? Is the property they own together protected or will it be ceased? Will they have to sell? The property they own together costs about £400.000 with an equity of about £100,000 (because she has borrowed money on this property to cover the store).

    In addition, I myself owe $40,000 on OSAP about 14 years ago, the interest on this has tremendously increased the total amount that I can’t afford this to pay even if given relief. Will I be able to write this off after so many years or can I strike a deal with the bank where they remove the accumulated interest and I just pay the actual amount? Do I have any say on this???
    I will await your reply
    Many Thanks

  2. J. Douglas Hoyes

    Hi Yetunde. Your questions are somewhat complex, and we would need more information to give you a complete answer. If there is equity in a property, the bankrupt must either surrender the property, or pay the equity into their bankruptcy estate. For example, your sister could buy your mother’s interest in the property from the trustee.

    As for your OSAP, yes, you can attempt to make a deal with the government, although the government is not always willing to make a deal. A bankruptcy or a consumer proposal is also an option.

  3. Robert

    I’m currently about half way through my bankruptcy term in Manitoba, and I met someone who I am considering asking to marry me. I didn’t even know her when these debts were incurred, or my bankruptcy initiated. She has nothing to do with any of my debts. We don’t have any joint accounts of any kind. If we marry, can she be dragged into paying for my debts, or damaging her good credit?

    1. J. Douglas Hoyes

      Hi Robert. The short answer is “no”, your new spouse is not liable for any of your debts, because they didn’t sign for any of them. Her credit is not impacted, because again, these are not her debts.

      The amount you are required to pay as surplus income during a bankruptcy is based on your family income, so if you get married while you are bankrupt it is conceivable that your bankruptcy payments could change, but this impacts you, not your spouse. If you want to determine exactly how that would work, please contact your trustee who can walk you through the math in your unique situation.

  4. Lisa

    My husband is planning to claim personal and business bankruptcy,I have no debts and also am self employed and owned my business longer than we have been married and have acquired much assets.will my assets be at risk if he goes bankrupt?

    Also we have a house, my husband has the mortgage solely in his name,I did give him half of the down payment when it was bought,(7500.00) the purchase was 307,000.00 it is valued now at 315,000.00 and we owe 265,000.00 ,will we have to sell the house? also the house was bought prior almost 2 years before we married

  5. Ruth

    If my husband applied initially for a credit card, however applied for a supplementary card for me, am I liable for the debt? If so, can I opt to keep the card and make payments?



    1. J. Douglas Hoyes

      If you didn’t apply for the card, generally you are not responsible for it. However, it depends how it is coded in the company’s system, so for a specific answer you should call the credit card company and ask them if you are liable for the card.

  6. Ken

    Hello I was wondering what should I do with my current situation, I co-own a house with my sister and am strongly thinking of declaring bankruptcy (have 12k+ in collections), house doesn’t have any equity at this time (owe about 135k and worth 140 max), i have a car that’s financed that I am planing on letting go (about 14k still owing), and still owe 2500 in property tax though I’ve been steadily paying it off. What i was wondering is if I declare bankruptcy what will happen regarding my house, would love to be able to keep it. Ps the province is New Brunswick.

  7. Andi

    My father-in-law and his small electrical business are going bankrupt. My question is, if property is in my mother-in-law’s name, like a house, land, 1 vehicle..etc and she has nothing to do with the company, will she lose the house\ land and vehicles?

    1. Ted Michalos

      The quick answer is no, but it depends on how long she’s owned the house, land etc. Remind your father-in-law to ask these questions to whatever trustee he has decided to use BEFORE he files. That way there will be no surprises.

  8. john

    Hello I am thinking of going bankrupt in Alberta Canada and my wife is not. I was hoping you could answer some questions for me about how exposed my wife’s assets may be. First question; I have a pickup truck I own outright that is used for work, it is worth about $3,000 and I have just recently married my wife she has a brand new car that is solely financed under her. My question is can we keep both cars? Second question is; I recently moved in with my new wife and her home is fully furnished, has lots of clothes and so on. I move in with little to no assets. I know there is $4000 worth of home furnishing that is exempt so do I have to disclose my wife’s home furnishing assets with mine? Are her assets at risk if they are over the $4000 dollar cap? Third question; how do assets get assessed? Is there a professional assessor that comes out to the house? And do they make an assessment of current value of what they can get for it or do they value it for what it was worth bran new?

    1. Ted Michalos

      You are only required to disclose your own assest if/when you file for bankruptcy. Unless you wife also files the bankruptcy will have nothing to do with the things that she owns…

  9. Sherilyn

    My ex wants to claim bankruptcy but we have a house together. There is about 70,000 equity in the house and I want to keep the house. How does that work?

    1. J. Douglas Hoyes

      Hi Sherilyn. If the house is in both of your names (you own it jointly), then when your ex claims bankruptcy the trustee will “seize” half of the house to recover their share of the equity. Of course it’s not possible to seize half of a house, so the first step would be for the trustee to contact you to see if you want to buy out your ex’s equity (perhaps by you getting a second mortgage). There are other possibilities, so you should either consult with a lawyer or a trustee, or make a plan with your ex before they file to deal with the equity.

  10. Jim G.

    Hello , I Am Thinking About Going Bankrupt In Manitoba And My Wife Is Not. We Both Have Separate Bank Accounts , Credit Cards Vehicles ,Etc. My First Question Is Will The Home My Wife Owns Be Affected In Any Way By My Bankruptcy? (Since Built New 15 Plus Years Ago Title And Mortgage Has Always Been In Her Name Alone .) And Second Question Is Will There Be Any Other Financial Issues That Can Affect Her Credit And Assets ? Thank You Jim


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