In most cases the answer to this is that there is nothing that will happen to your spouse if you file for bankruptcy.

The way the law works is that the only way you are legally responsible for a debt is if you signed on the debt. Simply being married or common law has no impact on your debts. It is really the same way with a bankruptcy. Unless your spouse has signed on these debts, she is not responsible for these debts and will largely not be impacted if you file for bankruptcy.

Where this gets a little complicated is if your spouse has signed on a debt, or if you own property jointly.

First of all, if your spouse has signed on a debt with you and you file bankruptcy, then your spouse is going to be fully responsible for this debt. There no automatic splitting of this debt 50/50, they will be responsible for the full balance of the debt, including any interest or penalties associated with that debt. The reason relates to the loan papers that were originally signed by the both of you. Those papers likely would have said that each of you were guaranteeing that the full balance of the debt as going to be repaid, regardless of what the other part (i.e. your spouse) does or doesn’t do. So if your spouse files for bankruptcy, you are left being responsible for the full debt.

The second complicating factor can be any jointly owned assets. If you have any assets (of course over and above the bankruptcy exemptions that are provided for in province) that are jointly held, they have to be dealt with in a bankruptcy. For example, let’s say that you have a 5th wheel that is worth $30,000 and is jointly owned with your spouse. If you file for bankruptcy 50% of the 5th wheel belongs to you and money would have to come in to the bankruptcy estate as a result. So this could be done a few different ways, the 5th wheel could be old, your spouse could keep her share of the proceeds and yours would be paid into the trustee. Or your spouse could pay in the $15,000 to your bankruptcy so that she could then own the full 5th wheel. Essentially the bankruptcy estate has a 50% ownership interest and because this property is jointly owned there will be an impact on the other party.

As every situation is unique, in order to properly assess and provide clear guidance we encourage you to file a Debt Evaluation Form . As I said earlier, most times there is no impact on a spouse, but this can change if there are jointly signed debts or jointly owned property. If you have any questions feel free to contact me directly at 780-435-5110 or email me through my Goth & Company website.