Question: My husband has about $40,000. in unsecured debt (credit cards and line of credit). The high interest rate (one at 21%) means at the minimum payments, he’ll never be out of debt. He is not behind on any payments. These are all in his name however the mortgage is in both our names. The equity on the house is about 30,000. Does the equity get split between the two of us on bankruptcy? We definitely need to keep the house, but we have no other assets (Van is worth less than $1000.) He makes good money and we have 3 children who will soon need college money. I need to keep my credit rating in good standing so I will be able to get the kids through college on my credit.
Is bankruptcy a good option for him?
Answer: No, probably bankruptcy is not a good option for him.
If you file bankruptcy in Ontario, you are required to pay to the trustee the equity in your house. Using your example, if you have $30,000 in equity, and the house is owned jointly by you and your husband, if your husband goes bankrupt he would be required to pay $15,000 in order to keep the house. Unless you have the ability to borrow $15,000 to buy his share of the house from the trustee, that is probably not a good option.
A better option may be to file a consumer proposal. In a consumer proposal your husband would pay at least $15,000, since you must offer the creditors more than they would get in a bankruptcy. However, he can make the payments in a proposal over up to a five year period, which means the monthly payment could be quite manageable. It may be a good strategy to keep the house, allow you to maintain good credit, and to allow your husband to finally deal with his debt.
There are many factors to consider, so you should start by booking a no charge initial consultation with an Ontario proposal trustee who can explain the process so that you can decide how to proceed.