Divorce and Debts
My husband and I are separated. He is being extremely difficult in the closure. Our JOINT debts include credit cards and lines of credits. Our house is entirely paid off. He is threatening to go bankrupt. What will happen to me? I am joint owner on the house. Do I have to pay all the debts or just half of them since I am only joint on them? I am so frightened that he is going to do this. What will happen to me? Can you help?
If your spouse files for bankruptcy in Canada you will be left responsible for the full balance of any joint debt. However, if you own your house free and clear in a bankruptcy there would be a significant portion of equity that would be available for yours or your husbands creditors. This explanation is going to get very complicated very quickly, but the jist of it is that your husband only owns ½ of the equity in the home and his portion of the equity will be factored into a bankruptcy (i.e. if the house is worth $100,000, ½ of that or $50,000 is your husbands and in a bankruptcy would need to be paid to the trustee who in turn would distribute it among the creditors). This could lead to you having to “buy out†your husbands portion (in the above example by providing the $50,000 to the trustee) which would thereby remove his name from title, or if you aren’t in a position to do this the trustee may have to force the house to be sold (although, you would still be responsible for all of the joint debt, so a fairly hefty burden).
I hope this has given you a brief idea of what you may encounter, but as this is a complicated issue and one that I can’t answer fully without more information, I suggest you contact a licensed trustee and perhaps a divorce attorney to review what would happen in a bankruptcy and how you can protect yourself.