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BDO Vernon

202 – 2706 30th Ave.
Vernon, British Columbia
V1T 2B6
Phone: (250) 275-8880

How to Deal with Debt Together: Choosing Debt Options

Are you and your spouse trying to deal with a lot of debt? For couples who are working through financial problems, finding the right debt options can add to the stress you’re already feeling. Unmanageable debt can have a significant impact on a relationship, so it’s important that you both have a good understanding of your financial situation and the debt options that can provide relief.

You may have heard about solutions like a debt consolidation loan, a consumer proposal, and filing for bankruptcy, but do you know how each solution would impact your finances? For instance, will your partner be affected if you choose to file for bankruptcy? Here are the answers to a few questions you might have about professional debt help and how that help will affect you individually and as a couple:

Can we apply for a debt consolidation loan together?

Yes. There is nothing preventing you and your partner from applying for a loan together. As you will need to qualify for the loan, your individual credit scores will factor into the decision. This means that sometimes it may be more beneficial for only one of you to try and qualify for the loan. If you take out an individual loan and it’s used to pay off shared debts shared make sure that there is a clear understanding of what you’re each contributing to the repayment. You should have an honest discussion about what would happen if the relationship ends before the loan is fully repaid.

Who can help with debt problems?

A Licensed Insolvency Trustee will answer any questions you have about how to reduce debt or deal with unmanageable debt. What is a Licensed Insolvency Trustee or LIT? An LIT is a debt help professional who is regulated and authorized by the federal government to assist individuals and businesses with their debt problems. You can learn more about the role of an LIT here.

Will my credit be impacted if my partner files a consumer proposal or bankruptcy?

No. If your partner files a consumer proposal or bankruptcy it will only impact your partner’s credit score. However, there are exceptions when your credit score would be impacted by one of these debt options. The next question addresses those exceptions.

What happens when we have joint loans and my partner is filing for bankruptcy?

It is not unusual for partners to take out loans or a line-of-credit together. In the event that one of you chooses to file a consumer proposal or bankruptcy you have a couple of options. The first is that the person not filing would have to assume full responsibility over that joint loan. You cannot include joint debt in an individual consumer proposal or bankruptcy filing.

The second option is filing a joint consumer proposal or bankruptcy to eliminate the joint debts. This would impact both of your credit so a discussion with an LIT will help you determine the best solution.

Will we lose our home if one or both of us files for bankruptcy?

Each province has a unique list of exemptions — or assets that are protected — during a bankruptcy filing. If you live in the Victoria capital area or the Greater Vancouver area, your homeowner’s exemption will be higher than if you live elsewhere in the province. If you have questions about whether you can keep your home, you can read more about how that is determined here or you can visit an LIT.

As the saying goes, there are no dumb questions. If you and your spouse have questions about debt options for resolving your unmanageable debt, the more you know the better. These FAQ sections can answer other questions you may have about a consumer proposal or bankruptcy. You can also visit the Office of the Superintendent of Bankruptcy website for a lot more information about what you and your partner should do if you owe money.

For other tips on how to reduce debt join the conversation on Twitter using #LetsTalkDebt.

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