Will My Consumer Proposal Affect My Spouse?
Understanding if and how a consumer proposal affects your spouse will be a big determining factor as to whether a consumer proposal is worth it in your situation.
When you file a consumer proposal, it does not directly affect your spouse or reflect on their credit report. Your consumer proposal is between you and your creditors. Your spouse is not liable for your debts simply because he/she is your spouse. However, your consumer proposal can have an impact on the other person in the following ways:
If you and your spouse obtain credit together, both of you are responsible for repaying the debt. If one party files a consumer proposal, the other person is still responsible for the entire debt.
When you file a consumer proposal, your Trustee (Licensed Insolvency Trustee) will evaluate your assets. The value of your interest in these assets will be factored into the consumer proposal.
For example – you jointly own a home with your spouse and it is determined there is $10,000 of equity in the home. The amount you offer your creditors in your consumer proposal will include the value of your share of the equity in your home. It does not mean that you will have to sell your home. The consumer proposal payment will be another obligation for the household that the non-bankrupt spouse needs to consider.
Financial institutions sometimes base their lending decision on household income. The most common example is when granting a mortgage.
The higher the household income, the more you can borrow. However, if they consider your income, they will also consider your credit history. So if your income is required to purchase a home, it’s not likely that you will be approved, at least not until you have completed your consumer proposal, and you have rebuilt some positive credit history. They can choose to approve the mortgage based on your spouse’s income alone; however, it may limit how much you can afford to spend on a home.
Surplus Income Contributions
When you file a consumer proposal, you may be required to make monthly payments based upon a calculation that depends on several factors; your income, the income of other household members, and the number of people in the household, among other variables. As such, your spouse’s income can result in higher payments to your consumer proposal. The Surplus Income calculation can be complicated, so you need to review it with your Trustee.
Separation and Divorce
Family law and bankruptcy law don’t necessarily work well together. In family law, it typically doesn’t matter who owns an asset; when you separate, everything is supposed to get divided equally regardless of who owns the assets. When you file a consumer proposal ownership of the assets matter, as well as when or if the ownership changed.
It’s important to realize that the circumstances and outcomes of a consumer proposal are not the same for everyone. You should consult a Licensed Insolvency Trustee for a detailed review of your financial situation.
Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;
You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.
Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.
We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.