A reader recently wrote to us that after the death of her husband, one of her friends found out that he had run into large debts without her knowledge. A very unpleasant surprise that only makes the grief harder. Is it possible to know if your spouse has debts?
Unfortunately, it is very difficult to find out if our spouse has debts, since in general everyone is responsible for their own debts. In addition, consultations with an authorized insolvency practitioner are confidential. So technically, we could go bankrupt without our spouse knowing. However, the Register of Insolvency and Insolvency Records (ic.gc.ca/app/scr/bsf-osb/ins/connexion.html?lang=eng) on the Office of the Superintendent of Bankruptcy of Canada is public.
It contains a list of all consumers who have filed for bankruptcy or a consumer application. You can also search for companies. The fee to be paid for a consultation is $8.
Therefore, outside of this register and unless the person has filed for bankruptcy or filed for bankruptcy, the spouse’s debts will likely go unnoticed by our radar.
A well kept secret until…
Sophie Desautels, licensed liquidator and Raymond Chabot’s first senior director of financial recovery, points out that the spouse is often unaware that their partner is in debt.
Consumption and gambling problems are among the most common causes of debt. Problems we usually keep to ourselves, well kept secrets until it all falls apart.
Overfilled credit cards and lines of credit can even result in the lending financial institution placing a legal mortgage on the family home. Again, the pot of roses may not be revealed until the time the home is sold, when tens or hundreds of thousands of dollars will be deducted from the sale price to compensate the creditor.
Who is responsible for what?
Everyone is responsible for their own debts, but the situation changes when it comes to joint debts. This is when you have approved or guaranteed a loan, line of credit, or even a debt consolidation loan. You could be 100% responsible for the amount and the creditor will turn against you if the borrower fails to meet their obligations.
Have you applied for an additional credit card for your spouse? Be careful, again you are liable for the expenses and cash advances he made using this card and it could even hurt your credit score.
If you bought a house with your civil partnership spouse and they go bankrupt, you will have to pay an amount to the trustee to buy back their part of the house if there is equity in the property. If there is no equity and the mortgage payments are up to date, the home can still be kept.
What to do with an insolvent property?
In the case of our reader’s friend, she faced a dilemma regarding succession after the death of her husband. Sophie Desautels explains that every case is different, but there are usually three possible options. The estate can be accepted and the heirs are then liable for the debts of the deceased. You can also renounce the inheritance – you have six months from the time you become aware of the death – a procedure that must be carried out by a notary or a lawyer. In this case, at the same time, we renounce the property that was bequeathed to us, but we can keep some souvenirs and worthless items that belonged to the deceased.
In the event of insolvency of the estate, bankruptcy is also an option. An approved insolvency administrator is appointed as the liquidator. He takes care of the insolvency of the estate and the administration of assets and debts. “The best thing to do is quickly take stock of the estate to determine whether we accept it, waive it, or file for bankruptcy,” recommends Sophie Desautels.
ADVICE:
- Only 50% of couples take the time to talk about money. It’s still a taboo subject that’s difficult to dialogue about. However, the best thing to do is to have an open and frank discussion on the topic.
- When is the best time to talk about money? If possible before bundling finances, for example when planning together or buying a house. At the very least, you should find out about your spouse’s relationship with money and savings, whether they have debt, and what their long-term financial goals are.