Spouse in Bankruptcy: Will My Spouse Be Affected If I Go Bankrupt?

What happens with spouse in bankruptcy is the most common question asked by people considering personal bankruptcy in Alberta.

In most cases, your debts are your debts only, and only you are responsible for them. If you go bankrupt in Alberta, your debts are discharged. The bankruptcy will not affect your husband or wife or common law spouse since he/she is not responsible for any of your debts.

The belief that many people share, that the spouse is responsible for their debts as well, often comes from the threats by collection agents that they will, if you don’t pay, go after your spouse for your money. This is simply a scare tactic - they can pursue only you for your debts. The only time a bill collector can go after your spouse for your debt, is if your spouse 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.

It is quite common for spouses to get supplementary credit cards for one another. Even if 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 it, they are responsible for the entire debt.

Your bankruptcy will affect your spouse's credit rating if you have joint debts. If there are no joint debts, the effects of your bankruptcy on your spouse can be only indirect, since you may not qualify as a co-signor in the future due to the bankruptcy.

In addition, in Alberta, if you are divorced, matrimonial property is split between individuals. For example, if you owned a house worth $100,000 dollars, each person would get $50,000. However, if you have any debts together, and you get divorced, you are both responsible for the whole debt - even if your separation agreement says you will each take care of half the debt; this means the creditor may pursue the other spouse for the entire amount.

To get more information on the rules regulating position of spouse in a bankruptcy, please contact our bankruptcy trustee in Alberta. If you are considering filing personal bankruptcy in Alberta, we highly advise you to contact a trustee. Remember, the longer you wait, the more difficult it will be to take care of the debt. By contacting us today, we can set up a free consultation, and can begin discussing your options.