In Canada, married or common-law couples can file a Joint Consumer Proposal to restructure up to $500,000 CAD of combined unsecured debt. This federal limit specifically excludes the mortgage on your primary residence, allowing couples to consolidate massive tax and credit card debt under one affordable monthly payment.
When financial hardship hits a household, it rarely affects just one person. 🏠 Couples frequently share joint credit cards, co-sign on vehicles, and rely on intertwined incomes to pay the bills. If both partners are overwhelmed by debt, filing two separate insolvency proceedings can be needlessly complicated and expensive. Thankfully, the federal Bankruptcy and Insolvency Act (BIA) offers a streamlined solution: the Joint Consumer Proposal.
Whether you and your partner live in Ottawa, Winnipeg, or Victoria, a joint proposal allows you to legally bind all your creditors into a single, renegotiated settlement plan. 📈 The most significant advantage is the doubled debt limit, giving couples massive leverage to avoid bankruptcy. To ensure their shared assets are fully protected, most couples choose to hire a local Licensed Insolvency Trustee (LIT) from our directory to administer the joint filing.
Step-by-Step Process in Canada
Filing a joint proposal requires both partners to be completely transparent about their finances and to meet specific legal criteria regarding shared debt. 📋 Here is how a trustee will guide you through the process.
Step 1: Proving “Substantially Similar” Debts
To file jointly, the BIA requires that the couple’s debts be “substantially the same.” 🔍 This does not mean every single credit card must have both names on it. It generally means that a significant portion of your financial liabilities are shared, co-signed, or incurred for the mutual benefit of the household (such as shared utility bills or joint lines of credit).
Step 2: Calculating the Combined $500,000 Limit
While an individual is capped at $250,000, a joint filing allows for up to $500,000 CAD in combined unsecured debt. 💳 Just like an individual proposal, you strictly exclude the mortgage on your principal residence from this calculation. Your trustee will tally up all CRA tax debts, payday loans, and credit cards from both partners to ensure you sit comfortably below the half-million-dollar mark.
Step 3: Designing a Unified Household Budget
Instead of managing two separate payments, your trustee will look at your total household income and living expenses. 💰 They will calculate what your family can realistically afford to pay each month. This single monthly payment will be offered to the creditors to settle both partners’ debts simultaneously.
Step 4: Filing and Triggering the Stay of Proceedings
When the LIT files your joint proposal with the federal government, an immediate “Stay of Proceedings” is enacted. ⚖ This legal shield instantly stops all collection calls, halts active wage garnishments for both partners, and freezes all accumulating interest.
Step 5: The Creditor Voting Process
Your creditors will have 45 days to review the joint offer. 📬 They vote based on the dollar value of the debt they hold. If the majority of creditors (representing more than 50% of the combined debt value) vote in favour, the proposal becomes a legally binding contract for all creditors, even those who voted against it.
How Much Does it Cost in Canada?
A joint proposal is highly cost-effective because you avoid paying dual administrative fees for two separate filings. 💵 The costs are federally regulated and entirely transparent.
- Initial Trustee Consultation: The required financial assessment by a Licensed Insolvency Trustee is legally $0 CAD.
- Administrative Savings: Filing jointly saves you from paying the standard OSB government filing fees and base trustee tariffs twice.
- Your Monthly Payment: The cost is simply the amount you agree to pay your creditors. For example, a couple owing $120,000 might agree to pay a total of $36,000, structured as a single payment of $600 CAD per month for 5 years.
- No Hidden Legal Fees: The LIT deducts their regulated fees directly from the $600 you pay each month; you never receive a separate bill for their services.
| Feature | Individual Consumer Proposal | Joint Consumer Proposal |
|---|---|---|
| Max Unsecured Debt Limit | $250,000 CAD (excluding primary mortgage). | $500,000 CAD (excluding primary mortgage). |
| Treatment of Co-Signed Debts | Protects you, but creditors will pursue your spouse for 100% of the balance. | Protects both partners entirely; the debt is settled together. |
| Monthly Payments | One payment based on individual income. | One unified payment based on pooled household income. |
How Long Does the Process Take?
A Joint Consumer Proposal provides immediate relief, but the commitment is long-term. ⌛ The maximum time permitted by law to pay off the agreed settlement is 5 years (60 months). Once the proposal is successfully paid off, the record remains on both partners’ credit bureaus for exactly 3 years before being removed.
Frequently Asked Questions (FAQ)
Do we have to be legally married to file a joint proposal?
No. Common-law partners can also file a Joint Consumer Proposal, provided they can demonstrate their finances and living expenses are substantially intertwined and shared.
What happens if we separate during the proposal?
If a relationship breaks down while a joint proposal is active, it can complicate matters. Both parties remain “jointly and severally” liable for the monthly proposal payment. If one partner stops paying, the other must cover the full monthly amount, or the proposal will annul (fail) for both people.
What if only one person works? Can we still file jointly?
Yes. If one spouse is the sole income earner but both spouses hold debt (such as a stay-at-home parent with credit cards in their name), you can file jointly. The working spouse’s income will be used to fund the single monthly household payment.
Can we keep our joint bank account?
Yes, you can keep a joint bank account. However, your trustee will likely advise you to open a new joint account at a completely different bank where you do not owe any money, to prevent your current bank from seizing your deposits to cover old debts (known as the right of set-off).
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