“Will my spouse or significant other be affected by me filing a proposal or bankruptcy, or do they even have to know I filed a proposal or bankruptcy?” These are two separate questions that I’m often asked by people trying to resolve their debt. Not telling your spouse/partner can be desired for various reasons: the individual may be dealing with debt they brought into the relationship that was not discussed or disclosed to the new partner; it can be debt generated during a relationship that the partner is not aware of (such as credit card debt, gambling debt, etc.); or it may be debt the partner is aware of but played no part in generating (i.e. debt from a business that the partner is not involved in).
A bankruptcy or consumer proposal is a process that can be filed by an individual and does not require the approval or consent of their significant other. That said, let’s consider each question separately.
An individual may find themselves in financial trouble through no fault of their partner and as such will not want their partner affected by the cure for their problem. It may not be the individual’s intention to hide the filing from their partner, but instead for sensible reasons they would like to shield the partner from any impact. In general, the filing of a proposal or bankruptcy by an individual will not affect his/her partner’s assets or liabilities. It will also not affect the partner’s credit rating.
That said, certain information related to the partner, such as income information, is generally required to be disclosed in a bankruptcy or proposal proceeding which may have an impact on the proceedings filed. Under existing legislation however, including privacy legislation enacted in Ontario, it may be possible for the partner to elect not to disclose their information. As such, it may be possible for an individual to file a bankruptcy or proposal and not have it affect their partner directly. It should be noted though that the filing can not address the spouse’s debt (i.e. are any of your credit cards held jointly with the partner).
To take it a step further, ultimately anything a person does will at least indirectly impact their partner as the family budget will be impacted by the payments required under a bankruptcy or proposal. A professional at A. Farber & Partners Inc. can review your financial affairs with you and advise you of the processes available and the nature of their impact on your spouse/partner.
The second question, is it possible to hide a filing from your partner, is a more difficult question. It may be possible for an individual to file a proposal or bankruptcy and complete the administration without their partner ever knowing. That said there are a number of reasons why the partner may learn of the filing no matter how hard the individual tries to conceal it, including:
- If the debtor’s partner has co-signed any of the debt, or is a secondary cardholder on a credit card, the creditor will likely pursue the partner for the debt once they learn of the proposal or bankruptcy which will ultimately result in the partner learning of the filing
- The debtor’s credit rating will be impacted. If the individual applies for joint loans or credit cards together with their partner once the proposal or bankruptcy is completed their filing may be disclosed by the institution where the couple is applying for credit
- There are documents that the Trustee/Administrator is required to send the debtor. It’s possible this information could be intercepted by the partner who thereby learns of the filing.
Under the legislation that exists in Ontario and Canada it is possible to file a consumer proposal or bankruptcy and limit your partner’s exposure. It may even be possible to hide your filing from your partner. However, I would suggest, based on experience that it’s very likely your partner will learn of your filing at some point. The proposal and bankruptcy processes exist in Canadian law to provide an honest debtor with an opportunity to start fresh financially. I would suggest that while you’re endeavoring to clean up a financial problem you do not want to create a different sort of problem with your spouse/partner.