Going through a divorce is tough enough without worrying about debt. Understanding your options can help with some of the stress, whether dealing with shared obligations like joint credit cards or trying to untangle your finances.
This guide will help you understand everything you need to know about debt and divorce, including the following:
- What happens to debt and assets in a divorce?
- Why consumer proposals are a smart way to manage your debt during a divorce
- Can I file for a consumer proposal without my spouse?
Key Points:
- What happens to debt and assets in a divorce?
- What is joint debt?
- Am I liable for my ex’s debt if we divorce?
- Why consumer proposals are a smart way to manage your debt during a divorce
- Take control of your debt with Harris & Partners today
- Can I file for a consumer proposal without my spouse?
- Will a consumer proposal affect my spouse?
- Can couples file joint bankruptcy after a divorce?
- What happens if you don’t pay a consumer proposal?
- Does bankruptcy eliminate support or alimony payments?
- Do I have to pay anything if my ex declares bankruptcy?
- Find financial freedom with Harris & Partners
What happens to debt and assets in a divorce?
When a marriage ends, sorting out who’s responsible for what—especially when it comes to debt—can get tricky. Shared debts like joint credit cards, personal loans, or lines of credit are usually dealt with in your divorce agreement or separation paperwork, but here’s the thing: lenders don’t have to follow these agreements.
If your ex stops paying their part of a joint debt, the creditor can still come after you for the whole amount, no matter what your legal documents say.
What is joint debt?
Simply put, joint debt is any debt that both partners are legally responsible for—like shared credit cards or co-signed loans. Even if your ex agrees to take care of a joint debt after the split, lenders can still come to you if payments are missed.
Am I liable for my ex’s debt if we divorce?
In most cases, you’re only responsible for debts you co-signed or took out together. If the debt is solely in your ex’s name, it’s generally their problem. That said, it’s always a good idea to double-check your legal agreements and account statements to make sure there are no surprises.
Why consumer proposals are a smart way to manage your debt during a divorce
Dealing with debt during a divorce is a unique challenge to tackle, and it can seem like there’s no good way to handle it without going bankrupt.
This is where consumer proposals come in.
Consumer proposals offer a way to reduce debt payments by negotiating to pay back a portion of what you owe. This makes it easier to manage your financial situation without losing important assets like your home or car. Many people choose consumer proposals during a marital breakdown because they offer legal protection from creditors, lower monthly payments, and have a smaller impact on your credit score.
Take control of your debt with Harris & Partners today
Unsure which debt relief option is right for you? Get in touch with the Licensed Insolvency Trustees (LIT) at Harris & Partners to see how a consumer proposal could fit into your divorce process and give you financial breathing room during your separation.
Can I file for a consumer proposal without my spouse?
Yes, you can file for a consumer proposal without your spouse. They let you negotiate with creditors to pay back some of your unsecured debts, like credit cards, personal loans, or student loans.
If you file on your own, it only covers your debts—not your spouse’s—unless you both agree to file a joint consumer proposal. However, if you have joint debts (e.g. a shared credit card), you are both still responsible. If one person stops paying, the other may be expected to cover the monthly payments.
Will a consumer proposal affect my spouse?
Usually, filing a consumer proposal won’t affect your spouse’s credit score unless they’re tied to the debt. For joint debts, though, your spouse can still be held responsible for the full balance.
Can couples file joint bankruptcy after a divorce?
It’s rare, but some separated couples file joint bankruptcy to deal with shared debts. This requires careful planning and input from a Licensed Insolvency Trustee, especially if you’re not on good terms.
In most cases, filing separately is simpler and makes more sense.
What happens if you don’t pay a consumer proposal?
If you stop making your proposal payments, the agreement can be cancelled, and creditors can come after you for the full outstanding debt. They could even take legal action. If you’re falling behind, contact a Licensed Insolvency Trustee right away—they can help you explore other debt-relief options before things get worse.
Does bankruptcy eliminate support or alimony payments?
No, filing for bankruptcy doesn’t cancel out child support payments or spousal support. You’re legally required to continue making these payments, no matter what happens with your other debts.
Do I have to pay anything if my ex declares bankruptcy?
If your ex declares bankruptcy, their share of any joint debts is wiped out—but creditors can still come after you for the entire balance. For example, if you share a credit card, you may be on the hook for the full amount owed.
Find financial freedom with Harris & Partners
Divorce can be hard on your finances. Whether you’re dealing with outstanding debts, joint accounts, or concerns about your credit score, there are solutions to help you take back control.
At Harris & Partners, our Licensed Insolvency Trustees (LITs) can guide you to the best debt relief option—whether that’s a consumer proposal to lower your debt or a plan to protect your assets.
Not sure where to start? Use our debt calculator to see your options. Just enter your estimated debt, take the quiz, and get a clearer path to a debt-free life. And when you’re ready, book your free consultation with one of our experts.
