What happens to my spouse’s credit if I file bankruptcy?

How will my bankruptcy effect my spouse in Hamilton, Ontario?

This is the most common question asked by people. We get this question from people who have been married for many years, and from people who are about to me married, common-law partners, and even from same sex couples.

In most cases, the answer to the question is very simple: Your debts are your debts; only you are responsible for them. If you go bankrupt in Hamilton, Ontario, your debts are discharged. Your husband or wife or common-law spouse is NOT responsible for your debts.

Many people have the mistaken belief that because you are married, your spouse is automatically responsible for your debts. This mistaken belief comes from the fact that many collection agents, when they are collecting debts, tell you that if you don’t pay they will go after your spouse for your money. This is a collection agency scare tactic; they can only go after you for your debts.

The only time a bill collector can pursue your spouse for your debt is if your spouse has co-signed or guaranteed your debt. For example, if you took out a loan and had your spouse co-sign for it, if you don’t pay, the bank can pursue your spouse for the money. They can go after your spouse because, once you co-sign a debt, it becomes your debt. The bank will go after your spouse because it is now also your spouse’s debt; not because they are your husband or wife, but instead because they also signed for the loan.

It is very common to get your spouse a supplementary credit card. Even though your spouse may not have signed the credit card application form, if they have a card with their name on it, and if they have used the card, they are responsible for the entire debt.

If you have no joint debts, one spouse’s bankruptcy will not effect the other spouse’s credit rating. However, the bankrupt spouse may not qualify as a co-signer in the future due to the bankruptcy, so one spouse’s bankruptcy may have an indirect impact on the other spouse.

What happens if we get divorced in Hamilton, Ontario?

In Ontario, if you are divorced, matrimonial property is split between the husband and wife. (If you owned a house together worth $100,000 and got divorced, and that was the couple’s only asset, if the house was sold, each person would receive $50,000). However, if you have debts together and you get divorced in Ontario, your are each responsible for the entire debt.

Even if your separation agreement states that you will each assume half of the debt, if the other party does not pay their half, the creditor can pursue the other spouse for the full amount of the debt.

You do not each owe half of the debt; it’s not a 50% – 50% split; it’s a 100% – 100% split if one of the partners doesn’t pay.

If you or your spouse is considering bankruptcy in Hamilton, Ontario, we recommend that you call one of our expert or e-mail us immediately to determine your options. The longer you wait to deal with these issues, the more difficult it becomes to deal with these debts.

In virtually all cases a Proposal to Creditors or a Personal Bankruptcy will deal with your debts, so we strongly recommend that if you or your spouse has more debt than you can handle, call us or e-mail us immediately to determine your options.

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