Will A Consumer Proposal Affect My Spouse?

“Will a consumer proposal affect my spouse?” This is a common question, and the good news is that in general, it will not.

If Your Spouse Co-Signed Your Debts

However, if your husband or wife co-signed your debts, the completion of your proposal won’t release your spouse’s liability if he or she was a co-signer or guarantor of your debts.

Why would you be in a situation where your husband or wife co-signed your debts? This may have arrived due the following circumstances:

• • You were a first-time borrower or a borrower with a poor credit history.
  • Your lender approved your loan because your guarantor agreed to be responsible for the debt.
  • You couldn’t put up collateral to secure a loan.
  • You wanted to borrow more than you can afford to repay.
  • You borrowed money for your business.

It should be noted that when you file a consumer proposal, all your unsecured debts must be included in your proposal proceedings, including any debts co-signed by your husband or wife. We mention this because many people in this situation ask if their co-signed debts can be excluded from a consumer proposal because they don’t want to get their spouse in trouble. But unfortunately, that’s not the case – as a matter of law, all of your unsecured creditors must be treated equally in your proposal proceedings.

If Your Spouse Cannot Pay Co-Signed Debts

If your spouse co-signed your debts such that he’d be unable to pay those debts on his own, he can file a consumer proposal jointly with you. A joint consumer proposal would be administered as one engagement and its completion would discharge both you and your spouse from the balance of your debts after you’ve paid your proposal in full.

If Your Spouse Can Pay Co-Signed Debts

On the other hand, if your spouse co-signed your debts but has the ability to pay those debts in full, he can pay those debts off and then participate in your consumer proposal as a creditor himself for the amount he paid.

When you meet with us, we’ll assess financial situation and advise you of your options to deal with the debts you co-signed with your spouse, including the options discussed above.

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