PERSONAL BANKRUPTCY: HOW DOES IT AFFECT A SPOUSE?

When debts build up, couples worry about the impact on their home. Personal bankruptcy raises specific questions. Will your spouse have to pay your debts, will you lose assets, and will your credit be affected? The answer depends mainly on the nature of the debts and on ownership. In this article Bernier & Associates clarifies the rules, explains the possible impact on household finances, and suggests ways to limit it.

What Does a Bankruptcy Change for a Couple?

Filing for personal bankruptcy releases the person who files from eligible debts. The spouse is not automatically responsible for the other person’s debts, and the spouse’s credit file remains separate. A spouse may still have to pay if they are a co-signer, a joint cardholder, or a loan guarantor. For budgeting, the licensed insolvency trustee considers family income to calculate surplus income under federal thresholds. This can temporarily reduce room for joint spending. For example, a joint credit card leaves the balance with the spouse who did not file, while an individual loan remains with the borrower alone.

How Are Joint Debts and Shared Assets Treated?

Joint debts remain owed by the spouse who did not file for personal bankruptcy, even if the other is discharged. Joint accounts may be frozen as a precaution, and access to credit often tightens for a few months. For assets, ownership and net equity prevail. A jointly owned home may require a buyout of the filing spouse’s share if net equity is significant. Recent transfers between spouses can be reviewed. Support payments are not discharged.

Protect Your Household: Practical Steps

Before and during the bankruptcy process, these actions strengthen a couple’s stability:

• Prepare a precise inventory of debts and indicate who is responsible.

• Separate credit cards and limits to avoid burdening the other person’s file.

• Pay essential household accounts first to keep services active.

• Set a realistic joint budget that includes required payments.

• Avoid transferring assets without professional advice.

• Explore a tailored consumer proposal to preserve certain assets.

If hesitation remains, an insolvency assessment helps you choose the most appropriate path for your household.

Take Stock Together to Reduce the Impact

To sum up: a spouse does not take on personal debts unless there is a joint obligation or a guarantee. Shared assets are handled according to ownership and net equity; the family budget is a reference to assess payment capacity. With coordinated decisions, a couple can get through the process and put their life plan back on a healthier track. To ask questions, discuss your options or start a personal bankruptcy application, contact us. At Bernier & Associates offices throughout Ontario and Quebec, our team answers clearly and offers solutions in line with your household’s reality.