Tag: Divorce and Bankruptcy
Divorce and Bankruptcy: What Happens If One Spouse Files?
What Happens to Joint Debts If One Spouse Files Bankruptcy?
In Ontario, joint debts remain a serious concern when one spouse files for bankruptcy. Common examples include joint credit cards, shared lines of credit, car loans, and mortgages. Under the Bankruptcy and Insolvency Act, a bankrupt person may be released from personal liability for qualifying unsecured debts. However, bankruptcy does not eliminate the responsibility of a co-borrower.
If both spouses signed for the debt, the creditor can legally pursue the non-bankrupt spouse for the full outstanding amount. This means that even if one spouse receives a discharge, the other may face collection calls, lawsuits, wage garnishment, or enforcement action.