What is a joint bankruptcy filing?

Joint bankruptcy is when two people file for bankruptcy together because they share the same debts.

To qualify, both parties should share equal responsibility for the majority of the debts.

Paragraph 155 (f) of the Bankruptcy and Insolvency Act says:

in such circumstances as are specified in directives of the Superintendent, the estates of individuals who, because of their relationship, could reasonably be dealt with as one estate may be dealt with as one estate.

Put another way: in some circumstances, a joint filing sometimes makes things easier.

For example, a married couple or a common-law relationship may have a co-signed bank loan or shared credit card, making them jointly liable for the debt. In other words, the lender can request payment from either person if one cannot pay.

In this scenario, a joint bankruptcy may be the best option for both parties because one person’s debt is similar to the other. Plus, a joint filing can include some individual debts too.

In some cases, family members may share the same debts, so it makes sense to file together because their income and expenditure are combined as one household.

Joint filing might also be the simplest solution for business partners who borrowed money together for business expenses.

To keep you on the right path, a Licensed Insolvency Trustee (LIT or trustee) will decide if a joint bankruptcy makes sense for both parties.

Good to know: You are not required to file a joint bankruptcy just because your partner or spouse has filed. You can individually file for bankruptcy regardless of your circumstances. If one person files, it will not necessarily affect your spouse or partner.

See also: How does bankruptcy affect my spouse?

Who can file a joint bankruptcy?

To file for bankruptcy, each person must meet the individual eligibility requirements to file:

  • You must owe at least $1,000 in unsecured debt.
  • You must either live in Canada, do business in Canada or own property in Canada.
  • You are unable to make payments to your unsecured creditors as they become due.
  • Your debts exceed the value of your assets.

To ensure you can file for bankruptcy, you must arrange a consultation with a Licensed Insolvency Trustee.

The advantages of joint bankruptcy

  • The debt limit increases from $250,000 to $500,000 (excluding a mortgage).
  • It can be ideal for a family if the household debt has been accumulated together. In this scenario, it makes sense to file jointly.
  • It can cost less, meaning that more money may be available to offer your creditors. Because of this, it increases the chances of success while keeping your payments affordable.

The disadvantages of joint bankruptcy

Here’s a tip: Discuss your situation with a trustee so they can help you choose the right option.

Get started

Can guarantor debts be included in joint bankruptcy?

If you co-signed or guaranteed payment of another person’s debt, and both parties want to alleviate these debts, then joint bankruptcy might be a viable option.

How to file for joint bankruptcy

Joint bankruptcy filings in Canada must be administered by a Licensed Insolvency Trustee.

Trustees have the knowledge, experience and skills to provide the best advice and help with your debt issues.

Find out what a Licensed Insolvency Trustee does and how to appoint one.

See also: What is a Licensed Insolvency Trustee?

Conclusion

If two parties share debts, joint bankruptcy can sometimes be a logical and simple way to eliminate them.

But filing a joint bankruptcy isn’t suitable for everyone. It depends on the personal and financial relationship of the people involved. You must trust the other person to meet their obligations to ensure success.

Take a couple who are divorcing as an example. Filing bankruptcy together would be discouraged as it may not have both parties’ complete trust and cooperation.

A Licensed Insolvency Trustee can advise you on the best option for your circumstances.

The trustee will act in both parties’ best interests when examining whether a joint bankruptcy filing is a good idea.

There are several other debt-relief options available to you, and bankruptcy is the most drastic of them.

For free advice, let us connect you with a trustee and start doing something about your debts today.

Get debt relief

Free consultation with a Licensed Insolvency Trustee by video, phone or in person.

  • Experienced trustees
  • Local offices
  • Personalized plan
  • No fees
Get started

It only takes 30 seconds.

Share this article