Debt Options: Is Joint Bankruptcy Right for You?May 08, 2017
When the costs of owning a home go up, it can put pressure on married couples and leave them seeking debt options. Utility prices have been an ongoing concern in Ontario, as power rates have risen four times as fast as inflation over the past ten years. While this is just one financial factor for homeowners, it can stretch a thin budget even thinner. Other debt options do exist – and while the number of bankruptcies filed actually decreased in Ontario, there are times when filing for bankruptcy is the only possible debt solution.
For married couples who are struggling with debt, a visit to a Licensed Insolvency Trustee (LIT) is a good idea to know when bankruptcy is right. An LIT is the only financial professional that is qualified to help with bankruptcy in Ontario and across Canada. But a visit with an LIT doesn’t necessarily mean you’ll need to declare bankruptcy. During your first visit, an LIT will walk you and your spouse through all available debt options, including the bankruptcy process, explaining each solution.
When a married individual or couple with overwhelming debt meets with an LIT, they often have a lot of concerns and questions. Will they need to file for bankruptcy? If only one of them files, how will it affect their spouse’s finances or credit rating? Is their spouse obligated to file too?
There are situations where married couples can file for bankruptcy together — called a joint filing. An LIT can walk you through what a joint bankruptcy entails for your specific debt situation, but you must meet certain qualifications.
Joint bankruptcy depends on the debts in question
To file for joint bankruptcy, all (or nearly all) of the married couple’s debts should be held jointly. That may mean credit cards, bank loans, payday loans, or unpaid bills held by both spouses. If you and your spouse share financial responsibilities, pay monthly bills together, and have jointly held accounts, an LIT will likely recommend a joint filing.
The advantages and challenges of joint bankruptcy
One advantage to filing joint bankruptcy is a reduction in fees — often, filing bankruptcy for a couple will cost the same as filing for one person. Of course, the biggest advantage to bankruptcy is a total discharge from your debts as a couple, which means an opportunity for a fresh start for both of you.
There are costs and fees when you file for bankruptcy; and paperwork must be submitted. In a joint filing, you and your spouse much rely on each other to submit required income and spending forms on a regular basis. Also, you and your spouse will need to surrender some of your assets, whether you file individually or jointly. While there are certain exemptions in Ontario, giving up any of your assets can be an emotional part of filing bankruptcy. Filing also impacts your credit score, resulting in an R9 rating for about seven years.
One alternative to bankruptcy
There is another option for married couples who have unmanageable debt. If you want to keep your assets and you’re able to repay some of your debts, an LIT may recommend a consumer proposal. Since 2006, an increasing number of Canadians have been filing consumer proposals as an alternative to bankruptcy. A consumer proposal has a lesser impact on your credit rating, you will be able to keep all of your assets, and there are no additional fees beyond your monthly payment. It’s a good idea to talk to your LIT about all viable debt options before you and your spouse make a decision. In the end, it’s that meeting with an LIT that will help you decide what’s right for you.
Do you have concerns about joint bankruptcy? Join the debt conversation on social media, using the hashtags #BDODebtRelief and #LetsTalkDebt.