How a Consumer Proposal Affects Your Spouse in Canada: Practical Guidance for Couples

Note: The information below is general guidance for Canadians and not legal advice. Speak with a Licensed Insolvency Trustee (LIT) for advice on your situation.

How a Consumer Proposal Can Affect Your Spouse

When one partner considers a consumer proposal, it’s natural to worry about how it might affect the other spouse. In Canada, debts are typically individual, and a consumer proposal focuses on the filer’s obligations. However, joint accounts, co-signed loans, shared budgets, and household assets can make the picture more complex.

This guide explains the direct and indirect impacts on your spouse, how joint debts are handled, what happens to credit scores and assets, and practical steps to protect your household. You’ll also find helpful examples and links to trustworthy resources from the Government of Canada and expert guides.

What Is a Consumer Proposal?

A consumer proposal is a formal agreement under the Bankruptcy and Insolvency Act where you offer to repay a portion of what you owe over time (usually up to five years). It’s filed by a Licensed Insolvency Trustee (LIT) and, if accepted, stops collection actions and interest on unsecured debts. Unlike bankruptcy, you keep your assets in most cases, and you make one affordable monthly payment.

To understand how a proposal affects your credit profile and future borrowing, see our guide to consumer proposals and credit scores.

Does a Consumer Proposal Affect Your Spouse Directly?

Individual Debt Responsibility in Canada

In Canada, you’re usually responsible for debts in your own name. If you file a consumer proposal for debts that only you owe, your spouse is not automatically part of the agreement and is not legally responsible for your repayments.

For a concise overview of spouse-related questions, read does a consumer proposal affect your spouse?.

Joint Debts and Co-Signed Loans

Joint debts are the major exception. If you and your spouse co-signed a loan or have a joint credit card or line of credit, both of you are fully responsible for the entire balance. A consumer proposal will address your responsibility, but the lender can still pursue your spouse for the remaining amount. This is true even if your proposal is accepted and you start paying your agreed amount.

• Example: You and your spouse share a joint line of credit with a $12,000 balance. Your proposal offers creditors $6,000 over four years. Your spouse remains liable for the outstanding amount under the original agreement.
• Co-signed car loan: If you co-signed your spouse’s auto loan and they file a proposal, the lender may look to the co-signer (you) to continue making payments.

Authorized Users vs. Joint Borrowers

Many couples mix up “authorized user” with “joint borrower.” An authorized user has a card linked to the primary account holder’s credit card, but they are usually not legally responsible for the debt. A joint borrower signed the credit agreement and is fully liable.

• Authorized user: The proposal impacts only the primary cardholder’s obligations. The authorized user is typically not liable for the debt.
• Joint borrower: Both parties are responsible. If one files a proposal, the other may be pursued for payment.

Indirect Effects on Your Spouse and Household

Household Budget and Income

A consumer proposal can reduce monthly debt payments, potentially relieving pressure on the household budget. When assessing affordability, an LIT may ask for household income and expenses to set a reasonable payment. Your spouse is not responsible for your proposal payments, but their income may be used to estimate shared costs and determine what you can realistically pay.

For general budgeting and consumer protection tips, the Financial Consumer Agency of Canada offers trustworthy resources.

Credit Report and Score

Your consumer proposal appears on your credit report; it does not appear on your spouse’s report unless they are a co-borrower or co-signer on included debts. Credit histories are individual in Canada. This means your spouse’s score should remain unaffected unless joint debts are involved and payments are missed.

To learn more about how credit reporting works, visit the Financial Consumer Agency of Canada.

Assets and Property

Proposals generally allow you to keep assets, provided you continue making payments on secured debts (like mortgages or car loans). Your spouse’s assets are not part of your consumer proposal. Jointly owned assets are also typically unaffected by the proposal itself; however, if joint debt payments fall behind, lenders may enforce security interests (for example, repossessing a vehicle financed jointly).

For more context on asset treatment, see what happens to your assets in a consumer proposal.

Common Scenarios and How They Play Out

• Joint credit card: One spouse files a proposal; the other remains liable. Consider separating accounts and planning how the non-filing spouse will handle the remaining obligation.
• Supplementary cardholder: The card is in one spouse’s name; the other is an authorized user. The proposal impacts only the primary cardholder’s debt and credit file.
• Co-signed car loan: If the filing spouse steps back from payments, lenders may demand payment from the co-signer (non-filing spouse).
• Mortgage: Mortgages are secured debts and aren’t discharged in proposals. Keep payments current. The proposal may help free cash flow to maintain the mortgage.
• Utility accounts: If utilities are jointly held and in arrears, a proposal may address the filer’s portion, but the utility provider may still request payment from the other account holder.

Practical Steps to Protect Your Spouse

• Identify all joint liabilities: List co-signed loans, joint lines of credit, shared utilities, and leases.
• Separate banking where appropriate: Consider individual chequing accounts to avoid offsets and simplify budgeting.
• Update auto-pay: Move essential bills to the non-filing spouse’s account if the filing spouse’s creditors have been withdrawing funds.
• Confirm “authorized user” vs “joint borrower” status: Call lenders to verify who is legally liable.
• Keep secured debts current: If you intend to keep a car or home, maintain payments to avoid repossession or foreclosure.
• Discuss a joint consumer proposal if needed: If both spouses carry unaffordable debt, a joint filing may make sense.

When Should Both Spouses File a Joint Consumer Proposal?

Couples can file a joint consumer proposal when their debts are substantially interconnected (for example, several joint accounts) or when both face significant unsecured debt. A joint proposal consolidates repayment into one plan, potentially reducing overall payments and simplifying household finances.

For detailed guidance, read navigate joint consumer proposals for couples in Canada.

Mortgage, Housing, and Cost-of-Living Considerations

Mortgages and rent are often a couple’s largest monthly expense. While a consumer proposal doesn’t include secured debts like mortgages, the reduction in unsecured payments can stabilize housing costs. Ensure rent and mortgage payments stay current to avoid eviction risk or credit damage from missed payments.

If you’re comparing options, our complete Canadian guide comparing bankruptcy and consumer proposals explains how each approach can affect homeownership and long-term affordability.

Tax and Government Benefits: What Spouses Should Know

Tax debts can be included in consumer proposals. The Canada Revenue Agency (CRA) is a creditor like any other, and proposals can negotiate repayment of personal income tax debt. However, your spouse’s tax obligations and refunds are separate. If you owe tax, CRA might offset your future refunds until a proposal is filed and accepted, but it does not take your spouse’s refund for your debt.

Learn more about CRA’s mandate and programs at the Canada Revenue Agency. For context on household debt trends and affordability pressures, visit Statistics Canada.

Choosing the Right Relief Option for Your Family

Consumer proposals work well when you have steady income and significant unsecured debt, and you want to avoid bankruptcy’s harsher consequences. If your debts are mostly joint or co-signed, evaluate the impact on both spouses carefully. In some cases, debt consolidation, budgeting support, or a joint proposal may be more suitable.

Explore how proposals compare to other relief strategies in our consumer proposal and credit score guide and the bankruptcy vs. consumer proposal comparison.

Conclusion

In Canada, a consumer proposal primarily affects the filer, not the spouse—unless joint debts or co-signing are involved. The proposal can lower monthly payments and reduce stress without directly harming your partner’s credit. Still, it’s vital to map out all shared obligations, separate accounts where prudent, and keep secured debts current. With careful planning, open communication, and professional guidance, couples can use a consumer proposal to stabilise finances and protect their household’s future.