My Spouse, Partner, and Family in Bankruptcy

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How will bankruptcy affect my spouse? Will my spouse have to declare bankruptcy?

A party can only be held responsible for repayment of a debt if they have signed a contract, loan agreement or credit card application. If your spouse or partner never signed a contract or requested a credit card for your debt, they cannot be held responsible for the debt. In Canada, marriage does not make you responsible for your spouse’s debts.

A spouse’s credit rating is not affected by you filing an assignment in bankruptcy unless your spouse has debt common to both you and your spouse and that debt is not being paid by your spouse.

Depending on the families financial situation a spouse may not have to file an assignment in bankruptcy. Meaning that if your spouse continues paying their own debt , no steps need to be taken by the spouse.

With respect to credit cards, there are two ways in which the second party can be held responsible for repayment of the debt.

  1. The individual actually requests a secondary card and signs an agreement saying they accept full responsibility for current and future debt.
  2. The  credit card company sends a card out in the second individual’s name with the primary cardholder’s number and the second individual actually signs and uses the card. Use of the card will hold the secondary person responsible for any past and or future debt.

Should you wish to remove your spouse or partner from your credit card or loan document, you must get confirmation in writing from the financial institution. If you do not obtain written confirmation, there is no guarantee the institution has removed the second party from their records.

Also, responsibility for debt between spouses as listed in a separation or divorce agreement does not legally bind a financial institution or creditor. Unless you obtain concurrence to the division and re-assigning of responsibility of debt from the creditor, they have the right to pursue anyone who signed on the debt.

Will bankruptcy relieve me of my child or spousal support obligations?

Bankruptcy does not relieve the bankrupt of any support obligations that has been ordered by a Court.

A member of my family died, leaving behind a lot of debt. As heir, do I have to pay the debt? If so, how can I get rid of it?

To avoid paying this debt, you just have to relinquish your inheritance. The deceased’s estate will then be placed under curatorship or it will go bankrupt. On the other hand, if you take the inheritance you will be responsible for the debt to the extent of funds you have received. You must first determine how much the assets are worth and whether they are worth more than the debts. If they are, some assets will be liquidated to pay the debts.

If you are an executor in an insolvent estate in Ontario you might want to consider assigning it into bankruptcy. We have had plenty of experience with these situations.

If I receive an inheritance while I am an undischarged bankrupt, what happens to my inheritance?

Any inheritance that you are entitled to vests in the bankruptcy estate until you are discharged from bankruptcy. The funds will be paid to the trustee to the extent necessary to pay your unsecured creditors and bankruptcy costs. If any funds remain, those funds will be delivered to you by the trustee.

If you are an executor in an insolvent estate in Ontario you might want to consider assigning it into bankruptcy. We have had plenty of experience with these situations.

These answers to frequently asked questions are provided as general information only. Each individual’s situation is unique.
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