Often when individuals are considering filing for bankruptcy, or filing a consumer proposal, one of their main concerns is how filing will affect their spouse. The truth is that while bankruptcy may affect your spouse in some ways, it may not be to the extent that you think.
The first thing to note is that filing for bankruptcy does not mean that your spouse will also have to file for bankruptcy. Your bankruptcy filing will not affect the credit rating of your spouse, and in fact your bankruptcy will not show up on their credit bureau report. Credit ratings and credit reports are unique to each individual and the ratings of each person are not maintained as a joint file upon entering into a marriage or common-law relationship.
With that being the case, you may wonder why married people usually end up filing for bankruptcy together. This is because while credit ratings are unique to each individual, many married people enter into credit agreements jointly. This means that each person is equally responsible to pay back the creditor. If you and your spouse applied for a joint loan or line of credit, or if you are the secondary card holder on any of your spouse’s credit cards, you are just as responsible for paying that creditor as they are, and vice versa. Bankruptcy will only protect the person who files for bankruptcy from collection action by their creditors. If you are both responsible for the debt, and your household cannot afford to pay it back, then you would both need to file an assignment in bankruptcy to get the protection from your creditors that bankruptcy offers.
Filing for bankruptcy or filing a consumer proposal may also affect your spouse indirectly as you start to rebuild your credit rating. When you are married, you may look to finance a vehicle or purchase a home in your future. If your spouse files for bankruptcy, their ability to qualify for a loan or mortgage may affect you as you would need to qualify on your own merit. Or, likewise if you file for bankruptcy and need a car loan in the future, your non-bankrupt spouse may need to co-sign as you may not qualify on your own. If you do qualify for future credit, a bankruptcy on your record may mean that you are offered a higher credit rating, which would then affect your spouse as the payments may be higher.
In general though, if your debts are your own and you choose to file a bankruptcy or consumer proposal, this should have no affect on your spouse.
