Joint Debts in a Consumer Proposal: 3 Things You Need to Know

Joint and cosigned debts are very common.  Perhaps you and your spouse had a bank loan together, or maybe your parents cosigned your line of credit.

What happens when one of the co-signors files a consumer proposal?  Here are 3 things you need to know.

  1. The debt isn’t split 50/50.  Both you are the co-signor are responsible for paying the entire debt.  If either of you fails to pay, the other is responsible for the entire amount.
  2. If you and your spouse separate, you are both still responsible for the entire debt, even if your separation agreement states otherwise.  The separation agreement is between you and your spouse.  The creditor  will still expect full payment from you.
  3. Cosigned debts can be included in a consumer proposal.  However, filing a consumer proposal does not remove the other co-signor’s responsibility to pay it.  The creditor will receive payments from both the consumer proposal and the other co-signor.  If your qualify, you may be able to file a joint consumer proposal.
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4 thoughts on “Joint Debts in a Consumer Proposal: 3 Things You Need to Know

    • J. Douglas Hoyes

      Carl: This is a complicated question, but the simple answer is no, you must complete your bankruptcy before you can file a consumer proposal for new debt.

      You can file a consumer proposal while bankrupt, but it would only include debts that existed at the start of the bankruptcy.

  • Keith

    Is there any way to not involve a co-signer of a particular debt in a consumer proposal? Let’s say if the parties are estranged?

    • J. Douglas Hoyes

      Hi Keith. It’s not a question of not involving a co-signer; they are already involved. If you file a consumer proposal, the lender may accept the proposal, but they still retain the ability to pursue the co-signer for any shortfall (since in most proposals the debts are not paid in full).

      One strategy to avoid this is to talk to the bank about removing the co-signer prior to filing the proposal. That may not be possible, but it’s worth a shot. Otherwise, the co-signer may be liable, and they may also have to consider filing a proposal or making arrangements to deal with the debt. A Licensed Insolvency Trustee can provide you with more advice on your specific situation.


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