When one spouse files for bankruptcy, it’s natural for the other to wonder how it may affect them. At The Oakman Group Inc., we meet with many individuals and couples in Mississauga and across Ontario who want clarity on this sensitive issue. The good news is that bankruptcy is a personal legal process under the Bankruptcy and Insolvency Act (BIA), which means your spouse is not automatically affected. That said, there are some important exceptions to be aware of.
Bankruptcy Is an Individual Process
Bankruptcy applies to the individual who files—not their husband, wife, or common-law partner. If you declare bankruptcy in Canada:
Your debts are yours alone. Your spouse does not become responsible for your credit cards, loans, or other obligations simply because you’re married or living together.
Your spouse’s credit rating is unaffected. Your filing does not appear on their credit report, nor does it reduce their ability to borrow money.
Joint assets and income are considered separately. Your spouse keeps assets that are legally in their name, and their personal income is not part of your bankruptcy.
When Your Spouse Could Be Affected
While bankruptcy is personal, there are circumstances where your spouse may feel an impact:
Joint Debts
If you and your spouse co-signed a loan, line of credit, mortgage, or credit card, your spouse remains fully responsible for the balance. Bankruptcy clears your legal obligation, but the creditor can pursue your spouse for the entire debt.
Joint Assets
Property held jointly (for example, a home, vehicle, or bank account) may be reviewed. The Licensed Insolvency Trustee will assess your share of the asset’s value in bankruptcy. Your spouse’s share, however, is protected.
Household Income and Surplus Income
Bankruptcy requires a review of your household income to calculate potential “surplus income payments” under the BIA. Your spouse is not legally required to disclose income, but if they choose not to, you may be deemed to earn the household income alone—potentially increasing your required payments.
Protecting Your Spouse During Bankruptcy
To minimize impact on your spouse:
Separate finances where possible. Avoid joint loans and credit if you are considering bankruptcy.
Be upfront with your Licensed Insolvency Trustee. Full disclosure ensures proper planning and protects your spouse’s interests.
Consider alternatives like a Consumer Proposal. This option may allow you to keep more control over assets and avoid potential issues with joint debts.
Key Takeaway
Filing bankruptcy in Canada does not automatically affect your spouse’s credit, debts, or financial standing. However, any joint obligations or assets will still matter. The best step you can take is to seek professional advice tailored to your household situation.
At The Oakman Group Inc., we’re here to guide you through every step—answering your questions and helping protect both you and your family.
Call to Action
👉 Worried about how bankruptcy might affect your spouse?
Schedule a free, confidential consultation with a Licensed Insolvency Trustee today. We’ll explain your options—whether bankruptcy, a consumer proposal, or another debt relief solution—and help you make the decision that’s right for your family.