In Canada, spouses with heavily overlapping debts can file a Joint Consumer Proposal under the Bankruptcy and Insolvency Act. This allows you to make a single monthly payment to a Licensed Insolvency Trustee, legally protecting both partners from creditors and saving thousands in administrative fees.
Dealing with unmanageable debt is incredibly stressful, especially when it impacts your entire household. 📍 Whether you live in Toronto, Calgary, or Halifax, sharing co-signed loans or joint credit cards means both partners are equally responsible for the full balance. A joint consumer proposal offers a formal legal pathway to settle your shared debts for less than you owe, without declaring bankruptcy.
Generally, Canadian insolvency law allows couples to file together if their financial affairs are closely tied. By consolidating your insolvency process, you can often save significantly on fees while streamlining your path to a debt-free future. If you are struggling, consulting a local lawyer or trustee from our directory can help you safely navigate these federal rules.
Step-by-Step Process for a Joint Consumer Proposal in Canada
Filing a joint proposal is a highly regulated legal process that must be administered by a Licensed Insolvency Trustee (LIT). You cannot file this on your own or through a standard credit counsellor.
Step 1: Calculate Your Shared and Individual Debts
Before proceeding, you must gather all your financial documents. 📄 This includes statements for joint credit cards, co-signed mortgages, and shared lines of credit. To qualify for a joint filing, all or almost all of your debts should be overlapping. If one partner has massive individual debt and the other has none, separate strategies might be necessary.
Step 2: Meet with a Licensed Insolvency Trustee
You must consult a federally regulated LIT, who acts as an impartial officer of the court. The LIT will review your household income, expenses, and total debt load to determine if a joint proposal is your best option. They will help you calculate a fair monthly offer to your creditors based on what your family can actually afford.
Step 3: Filing the Proposal and Stopping Creditors
Once you sign the required forms, your LIT will file the joint proposal with the Office of the Superintendent of Bankruptcy (OSB). ⏱ This triggers an immediate “stay of proceedings.” This means all wage garnishments, collection calls, and lawsuits against both of you must legally stop.
Step 4: The Creditor Voting Period
Your creditors have 45 days to formally vote on your joint offer. Because you are filing together, creditors look at the combined household ability to pay. If creditors holding at least 50% plus one dollar of the debt value accept the offer, it becomes legally binding on all unsecured creditors.
How Much Does it Cost in Canada?
One of the biggest advantages of a joint consumer proposal is cost efficiency. Instead of paying two separate sets of administrative fees, you only pay one.
| Feature | Joint Consumer Proposal | Individual Proposals |
|---|---|---|
| Monthly Payment | One combined household payment | Two separate payments |
| LIT Fees | Included in your single payment | Double the administrative fees deducted |
| Debt Type | Best for co-signed or joint debts | Best for completely separate debts |
💰 Keep in mind that LIT fees are strictly regulated by the federal government and are deducted directly from the single payment you make to your creditors. There are usually no upfront lawyer fees required to start a consumer proposal.
How Long Does the Process Take?
In Canada, a consumer proposal can last anywhere from a few months up to a maximum of 60 months (5 years). Most couples choose a 3 to 5-year term to keep their monthly payments affordable. You can always pay off your joint proposal early without any penalties if your financial situation improves.
Frequently Asked Questions (FAQ)
Can common-law partners file a joint proposal?
Yes. Under the Bankruptcy and Insolvency Act, common-law spouses can file a joint proposal just like legally married couples, provided their debts are significantly intertwined.
What happens if one partner stops paying?
Because it is a joint agreement, both partners are “jointly and severally liable” for the proposal payments. If the payments fall three months behind, the proposal is legally annulled, and creditors can pursue both partners for the full original amounts.
Do we need to hire a local lawyer?
Generally, you do not need to hire a separate lawyer for a standard consumer proposal. The process is entirely handled by a Licensed Insolvency Trustee. However, if you have complex legal issues regarding property division, consulting a local family law firm may be beneficial.
Will this affect both of our credit scores?
Yes. A consumer proposal will be recorded as an R7 on both partners’ credit reports. It typically remains on your credit file for 3 years after you complete all your payments.
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