Do you live in Edmonton, Alberta? Are you having trouble with your debts, do you have questions like:
How will it impact my spouse if I file for bankruptcy?
If I file for bankruptcy will my husband’s credit rating suffer?
If I file for bankruptcy will my creditors still come after my wife?
These are among many of the most common questions I encounter when meeting with people in my Edmonton office and questions that seem to be universally asked by people who are facing financial problems.
The first thing to keep in mind is that debt and marital status are two separate issues. You are only responsible for a debt you have signed on. This can be a cosigned loan, a jointly signed loan, or in some cases a supplementary credit card, but no creditor has the ability to attack your spouse or common-law partner simply because of your relationship. As a result, if your spouse has a creditor that is attempting to collect money and suggests you should pay the debt for or on behalf of your spouse, this isn’t a legal requirement. There is nothing your spouses creditor can do to force you to pay the debts of your spouse. If the creditor suggests you are responsible for any of your spouses debts ask to see the original loan documents to verify that you are legally responsible for the debt.
This same logic applies in a bankruptcy. If your spouse or common-law partner has not signed on the debts and does not sign on the bankruptcy, your filing of a bankrutpcy will not directlyimpact your spouse. Their credit will not be affected nor will their debts (i.e if the visa bill is in your spouses name and you file bankruptcy, your spouse will still be responsible for the debt),
However, while your in bankruptcy there are a few things that indirectly may have an impact on your spouse. Firstly, to be eligible for discharge each bankrupt must file monthly income and expenses statements. These statements essentially require the household to keep receipts of any purchases in the household (and yes this does include the coffee and donut from Tim Hortons) and at the end of the month the receipts must be summarized and this summary (or income and expense statemnet) must be filed with the trustee. Additionally, there must be something to verify the level of earnings of everyone in the household (including your spouse). As a result, to be eligible to be cleared from your debts you must obtain yours spouses cooperation with respect to these statements and supporting documents and failure to do to file these statements or provide the necessary verification will result in an opposition to discharge.
The only other area that can sometimes become an issue is with respect to the joint ownership of property. Each province sets out a list of property that one is entitled to keep when they file bankruptcy. If you and your spouse own joint property and your share of the property exceeds the amount allowed by the province than arrangements by the trustee will have to be made. These arrangements can vary significantly, but often result in an agreement to sell the non-exempt portion of the property so that the existing spouse can retain their portion. As you can see this is a confusing issue and one that is better discussed directly with a trustee. The one thing to note is that in most instances the property in question falls below the exemptions allowable in Alberta and as a result there is very rarely an issue.
The biggest concern most people have prior to filing for bankruptcy is whether or not their bankruptcy will impact their spouses credit. While I briefly mentioned this earlier in this article I must emphasize that credit and marriage (much like debt and marriage) are separate issues. Your credit rating will only reflect credit you have signed on. As long as your spouse maintains the payments on any contacts they have entered into, their credit rating will not be impacted. Your credit rating should never be reflect your spouses debt levels or credit history, only information pertaining to your debts can be listed on your credit report and for debts to be considered yours you would have had to sign on the contracts as previously discussed. If you should ever find that the credit bureau is reporting debts of your spouse (or any other party) for which you are not legally responsible you should immediately contact the credit bureau and have this information removed. To do so you will likely have to provide copies of the original documents to verify that you did not sign on the contract in question and this will take a little work, but I suggest you take the necessary time and get the problem solved as soon as you can.
Hopefully this has helped to shed some light on what is often a very difficult and emotionally charged topic. Should you require more information on any of this you can visit us online at Canada-Bankruptcy.org for more details.
Barton K. Goth is a senior advisor with Goth & Company Inc. – Trustee in Bankruptcy. Goth & Company Inc. is an Edmonton based firm licensed by the Federal Government and committed to helping people find solutions to financial difficulties.
For more information about bankruptcy or the various alternatives available visit http://www.edmontonbankruptcy.org or call Goth & Company Inc. directly at 780-435-5110