Does a Bankruptcy or a Consumer Proposal affect my spouse’s credit rating?

One concern that many individuals from Kitchener, Ontario have is: what is the impact that a personal bankruptcy or a consumer proposal will have on their spouse’s credit rating?

First of all, credit ratings are individual specific, that is, they only report the history of one person. While your spouse’s name may appear on the credit rating under the information section, their credit score is theirs, and yours is yours. Therefore, the filing of personal bankruptcy or a consumer proposal by one spouse will not directly affect the credit rating of the other spouse.

However there is one area of concern and that is when debts are considered joint or co-signed. This would include any secondary credit cards on the main account. If the debts are joint, that means both spouses are responsible for the debts, jointly and severally. If only one person files a personal bankruptcy or a consumer proposal, the other party can be held responsible for all of the joint debts. That means the bank will look to the spouse for payment.

For more information on credit rating, please see Equifax at www.equifax.ca and/or Trans Union at www.transunion.ca.

If I go bankrupt in Kitchener, does my spouse also have to declare bankruptcy?

Whether you are married or not, you are only responsible for debts that you have signed for and agreed to pay. The fact that you are married does not automatically make you responsible for your spouse’s debts. This means that unless you both have more debt than you can handle, it may only be necessary for one spouse to go bankrupt. Of course if you have both cosigned for your debts, than it may be necessary for both of you to declare bankruptcy. You may choose to file separately or can do a joint bankruptcy. In either case, a meeting with a trustee is recommended to carefully review all of your options.

At Hoyes, Michalos in Kitchener, Ontario, we work with many couples to review their debt situation and develop a plan for the future which deals with their past debts. Sometimes only one spouse files insolvency, sometimes both, sometimes jointly and sometimes separately.  Each family situation is different and we tailor a plan that meets your family needs. To review your situation further, please e-mail us a question or call our Kitchener office at 519-747-0660 or 310-PLAN.