Bankruptcy Options. What happens if my Ex-Spouse pays off my debts during the divorce?

What happens if my Ex-Spouse pays off my debts during the divorce?

 I am still working on my paperwork, and considering the bankruptcy options that we talked about at my free consultation,  but there has been a hopeful and positive development that my ex-spouse might pay off my debts for me during my divorce settlement. What will happy to a bankruptcy if my ex-spouse pays off my debts during the divorce?  I have spoken to my accountant and he has advised me to speak with you to maybe consider some other options other than filing for bankruptcy.  Would a consumer proposal work for me even though my house is being foreclosed?  Is it possible to set up another meeting or phone meeting?

Yes, we would be happy to help you with other alternatives.  But can you wait a bit?  It would be much easier to advise you if we had a clear picture of what exactly your spouse plans on doing.  If you can wait for him, then you will have clarity.  As long as no one is seizing your assets/wages, and if you can keep even for a bit, just paying the minimum, it may be best to wait.  It would not make sense to do something formal with us if he ended up paying off the debt in the end.  Will that work?

 Follow up Question:

 Yes that makes sense, however my second mortgage has taken over the sale of my house and I am 2 months behind on bills.  My ex wants me to sign off of a legal document which gives me no rights to any of the business that we had worked on and it is very complicated.  My ex-spouse says that I need to sign off on the document first, and then when he gets funds he will help me.  I am trying to find a lawyer to help me to get him to agree in a formal document that he will sign say he will pay all the family debts.

 Follow up by Trustee

 My suggestion to you is to deal with the family issues first.  The debts can be dealt with at any point (yes, I recognize that it “easy for me to say that”, ) but if your Ex does not pay the debts, then you may have to do some sort of payment arrangement.  And once you have entered  into some sort of arrangement, either proposal or bankruptcy, then there is no way to wrap these up early so to speak. 

For a bankruptcy, if you start that process, even if your debts are eventually paid in full, you are still bankrupt and there is no easy way to get out of the bankruptcy process early.

 For a Proposal, all of your creditors need to be considered, so we need to determine what the shortfall is on your mortgage if any.    The foreclosure process can take up to 6 months generally to finalize and then you may have to wait further for the house to actually sell so you can determine what if any shortfall there actually is and how you can address this amount.  The bank will not move to seize any assets or garnish your income etc. until this process is finalized and then they would have to get a judgement  against you in order to proceed (at least 30 days AFTER the house is sold)

 HOWEVER, if you think there is equity in your home, i.e., it will sell for an amount higher that what the mortgage is, then you need to do something with a trustee before the date of any sale to protect your exempt amount.  (in BC this exemption is $12,000) If you think that the house will sell for less than what you owe, then protecting this equity portion is not a concern for you.

 Further, just because you ex-spouse agrees to pay off the family debts, it doesn’t stop your creditors from coming after you.  They are not a party to the agreement and therefore it is not binding on them.

 If you can live “on cash” for the next while, that may be helpful for you.  Make sure you have a bank account somewhere without any debt attached to that account (credit cards, over draft, line of credit etc) and try to live off the cash that you have or make.  If you can either live off your income that you make each month and that is enough for your basic needs, then just do that and don’t really worry about your debts.  If you creditor try to garnish your wages, then we can chat. 

 You can declare bankruptcy or file a proposal at any point but I don’t want you to rush into anything that is not in your absolute best interest.  Make sure the timing and what you decide to do is best for you and not for everyone else.

 I suggest you obtain the advice of a good family lawyer and follow their recommendations.

 BUT REMEMBER, if you just need to do something right now as you can’t deal with one more things, we are happy to help you.

 

 

 

 

 

 

 

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