How Are Debts Divided During a Divorce or Separation in BC?

FAQs

How Are Debts Divided During a Divorce or Separation in BC?

In British Columbia, the Family Law Act (FLA) treats debts as part of the financial picture that must be addressed during divorce or separation. Debts incurred during the relationship are considered family debts and are generally divided equally, regardless of whose name the debt is under.

Key Points About Debt Division

Family Debt

Family debt includes all financial obligations incurred by either spouse during the relationship. This can include:

  • Mortgages
  • Credit card debt
  • Personal loans
  • Car loans
  • Lines of credit

Debt incurred after separation may also be included if it was taken on for the benefit of the family (e.g., paying for household expenses).

Excluded Debt

  • Debt incurred before the relationship typically remains the responsibility of the spouse who brought it into the relationship.

Example: If one spouse had student loans before marriage, these are generally excluded unless used for family purposes.

Division Is Based on Fairness

  • While an equal division of debt is the default, the court can order an unequal division if equal division would be significantly unfair. For instance:
  • One spouse earns significantly more income than the other.
  • One spouse is solely responsible for incurring a large, unnecessary debt (e.g., gambling losses).

Practical Steps to Dividing Debts

Identify All Debts

  • Both spouses must disclose all debts, including joint and individual obligations.
  • Joint debts (e.g., co-signed loans) remain the shared responsibility of both parties, even if divided differently in the divorce agreement.

Negotiate Debt Division

  • Spouses can agree on how to divide debts, often as part of a separation agreement.
  • For example, one spouse might agree to take on the mortgage debt in exchange for a greater share of assets.

Protect Your Credit

  • Joint debts, such as credit cards or lines of credit, can affect both spouses’ credit scores. Ensure all agreements about debt division are legally enforceable to avoid future issues.

Example in a Vancouver Context

A divorcing couple in Vancouver owns a home with a $500,000 mortgage and a shared credit card balance of $10,000. These debts are family debts and typically split equally. If one spouse has an additional $30,000 in personal credit card debt incurred for personal spending, this debt may not be shared unless it was for family-related expenses.

Seek Legal Assistance

Dividing debts during divorce can be complex and financially impactful. To protect your interests and ensure fairness, Mills Family Law, experienced Vancouver family lawyers, can provide guidance on debt division and financial planning. Call us at 778-945-3003 or fill out our web form to get started today.

Related FAQs

For more information, refer to the Family Law Act of BC.

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