How will a bankruptcy affect my spouse?
Is there a relationship between debt and marital status? Many people believe that there is. Many people believe that as soon as you are married your spouse or even common-law is then responsible for your debts. This is not the case.
As a general rule, you will find that debts and marital status are distinct and separate. Just because you are married to or live with a person that owes money does not make you responsible for their debts. This same principle holds true if your spouse or common-law files a bankruptcy a consumer proposal or any other option to deal with their debt. If it is not your debt and you have not signed on that debt you are not responsible for it and anything done to deal with this debt will not directly affect your or your credit.
However, there are some exceptions to the general rule. While in most cases your debts are your debts and only you are responsible for them, there are a few times when a spouse may be affected. The first exception to the rule is if your spouse has co-signed or guaranteed your any of your debts. By physically signing on any of your spouse’s debts, you have essentially confirmed that whatever happens (bankruptcy, illness, debt, unemployment etc.), you will ensure the debt will be paid. If you have signed, you are responsible, and the collection agents will be legally able to pursue you for the debt. Once you have signed on the debt it becomes your debt and you are just as responsible for it as your spouse.
The second exception deals with credit cards. If you have been given a supplementary credit card, signed the back of the card, and used that card, then you can be held responsible for anything purchased on that account. This comes back to the signature you have given. As soon as you have signed the card, you are at risk and can be held responsible for the debt just as above.
These are the major two exceptions to the general rule that debt and marital status are separate and distinct. However, you must remember that every situation is unique. Depending on the types of assets you have, where the money has come from to purchase these assets, and other situation specific information, there may be a marginal impact on your spouse. So I always recommend that you contact an Edmonton bankruptcy trustee to arrange a confidential no fee assessment so you can determine whether or not bankruptcy or a consumer proposal will help in your situation and if so how you can expect they will unfold.
