Section 86 of the Family Law Act states:

86  Family debt includes all financial obligations incurred by a spouse

(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and

(b) after the date of separation, if incurred for the purpose of maintaining family property.

 

On separation, all debt and other financial obligations incurred by either spouse from the date of cohabitation to the date of separation will be divided equally between the spouses.

 

All debt and other financial obligations incurred after separation are the sole responsibility of the spouse that incurred the debt unless the debt has been incurred to maintain existing property.

 

The equal division of family debt can be unfair particularly if one spouse spent money during the relationship which the other spouse had no knowledge of. Section 95 of the Family Law Act provides:

95  (1) The Supreme Court may order an unequal division of family property or family debt, or both, if it would be significantly unfair to

(a) equally divide family property or family debt, or both, or

(b) divide family property as required under Part 6 [Pension Division].

(2) For the purposes of subsection (1), the Supreme Court may consider one or more of the following:

(a) the duration of the relationship between the spouses;

(b) the terms of any agreement between the spouses, other than an agreement described in section 93 (1) [setting aside agreements respecting property division];

(c) a spouse’s contribution to the career or career potential of the other spouse;

(d) whether family debt was incurred in the normal course of the relationship between the spouses;

(e) if the amount of family debt exceeds the value of family property, the ability of each spouse to pay a share of the family debt;

(f) whether a spouse, after the date of separation, caused a significant decrease or increase in the value of family property or family debt beyond market trends;

(g) the fact that a spouse, other than a spouse acting in good faith,

(i)   substantially reduced the value of family property, or

(ii)   disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse’s interest in the property or family property to be defeated or adversely affected;

(h) a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order;

(i) any other factor, other than the consideration referred to in subsection (3), that may lead to significant unfairness.

(3) The Supreme Court may consider also the extent to which the financial means and earning capacity of a spouse have been affected by the responsibilities and other circumstances of the relationship between the spouses if, on making a determination respecting spousal support, the objectives of spousal support under section 161 [objectives of spousal support] have not been met.

 

An example of debt incurred during the relationship which should not “fairly” be divided between spouses would be money spent by one spouse on a credit card to pursue a new relationship with a third party. Another example would be where one spouse was unaware that the debt was being incurred.

 

The interest or rights of third party creditors are not affected by the equal division of debt between the spouses. Both spouses will remain fully responsible for all debt owed to any creditors.

 

Deborah A. Todd
Deborah A. Todd