I just got married and I was wondering if I am responsible for my partner’s old debts? The short answer is no. Just because you married each other, this does not mean that you have any liability to pay anything from your partner’s old debts. The old debts were his/hers before you got married – the liability to pay the old debts does not change. A word of caution. Do not sign anything that commits you to pay anything against your partner’s debts and do not request or accept a spousal credit card from your new partner. Keep your finances separate.
A proposal is a scheme of arrangement whereby you offer to your creditors something less than the total of what you owe them. That is why you see advertising that you can save up to 75% of your debts and not go bankrupt. The key words are “up to.” Sometimes this is possible, but not always. It depends on who you owe and how much you owe them. Very few proposals require you to turn over your car or other assets as part of the terms of your proposal.
If you do not owe money on your car to a bank or finance company, you need only to disclose the value of the car on your list of assets. Note that your car is exempt in Ontario to a value of $5,650. This increases to $11,300 if it is used for business purposes.
If you still owe money on your car, remember that the bank or finance company does not want your car – they want your monthly payments to continue – that is how they make money. If your payment history has been good, your trustee/administrator of your proposal will be able to assist you in keeping your car.
In exceptional circumstances, you may find that your car payments are much higher that you can afford. The debt on the car may be much higher than the car is worth and you may want to get out of an unfavourable contract. Your trustee/administrator of your proposal can still help you by arranging for your car to be turned in to the secured creditor (the bank or finance company) before you sign the papers for your proposal. The debt owing to the bank or finance company will be estimated as net of the selling price of the car. This debt will be included in your proposal. The estimate will be updated once the car is sold and the actual loss to the bank or finance company is known. Your trustee/administrator of your proposal will often assist you in obtaining a more affordable vehicle either prior to or during the early stages of your proposal.
A good trustee/administrator of your proposal should be considered as a resource person to help you solve all of your financial problems. He or she has seen many similar problems in the past and can assist you in your recovery.
For a definition of discharge, please refer to our blog: Bankruptcy – What is a Discharge.
If you are filing an Assignment in Bankruptcy for the first time, there is a period of time that is allowed for the trustee to complete their administration of your bankruptcy. The earliest time that you can be discharged from your bankruptcy is 9 months from the date that you originally filed the bankruptcy. Surplus income (if it applies) will extend your discharge date from 9 months to 21 months. Other problems may result in your trustee, a creditor or the Office of the Superintendent in Bankruptcy opposing your automatic discharge date to a future undetermined date. This future date is determined by your trustee only after all of the original problems are resolved. When your trustee requests you to supply information or answer questions that may arise during the administration of your bankruptcy, “failure to cooperate” with the trustee is the most common reason why your trustee will oppose your automatic discharge.
Technically, there is no limit to the number of times that you can file an Assignment in Bankruptcy. The practical issue is that after the first bankruptcy, it gets harder to get discharged from the bankruptcy. In a second bankruptcy, you are still entitled to an automatic discharge but the minimum period of time is increased from 9 months in a first bankruptcy to 21 months. If you have surplus income, the minimum period until you are discharged is 36 months. Simply stated, the second bankruptcy takes longer to finish and is more expensive than the first bankruptcy.
If there are any circumstances in the second bankruptcy that causes the trustee, a creditor or Office of the Superintendent to oppose you automatic discharge, the court will not look kindly on the fact that this is a second time bankruptcy. This is especially true if both bankruptcies have a similar cause. It is for this reason that your trustee (for your 2nd bankruptcy) will ask you for copies of the documents from your first bankruptcy. Your trustee will want to be very explicit in describing the cause of your 2nd bankruptcy. It may be a hassle for you to find your old papers, but your trustee is only trying to help you. About two months before your discharge, your trustee is required to write a report* in which he describes what he has found during his administration of your file. In this report, the trustee must recommend that you receive an automatic discharge or he is required to oppose your discharge which may result in an appearance in court by yourself.
* Report on the Bankrupt’s Application for Discharge is required under Section 170 of the Bankruptcy and Insolvency Act. It is often simply called the “170 report.”