Debt division
Debt division lawyer in Surrey, BC
Family debt in British Columbia is divided equally between spouses, in the same way family property is, and it does not matter whose name the debt is in. Family debt is everything either spouse took on during the relationship, plus debt incurred after separation where it was used to maintain family property.
We deal with debt as part of the whole financial picture, not as an afterthought, because in many separations the debt is the larger number. Shergill Law Corporation is a family law firm in Surrey serving clients across the Lower Mainland.
The short version
Your separation agreement decides what you and your spouse owe each other. It does not decide what you owe the bank. A lender can still pursue you for a joint debt regardless of what your agreement says, so the safest terms are the ones that remove your name rather than promise an indemnity.
What counts as family debt?
Family debt is all financial obligations either spouse took on from the start of the relationship to the date of separation, however the debt is registered. Mortgages, lines of credit, credit cards, car loans, tax owing and business debt can all qualify.
Debt incurred after separation is family debt only where it was used to maintain family property, for example continuing mortgage payments, property tax or necessary repairs on the family home.
Am I responsible for debt in their name?
Between the two of you, yes, where it is family debt. Equal responsibility applies regardless of whose name is on the account, so a credit card in one spouse's name used for family expenses is shared.
A court can depart from equal division of debt where an equal split would be significantly unfair. Debt run up on gambling or a hidden second household is the kind of fact that supports an unequal division, but the threshold is high.
Does a creditor have to follow our agreement?
No. Your agreement binds you and your spouse. It does not bind the bank. If you are a joint borrower or a guarantor, the lender can pursue you for the full amount even where your agreement says your spouse is responsible.
The practical answer is to close joint accounts, refinance the debt into one name, or pay the debt out on the sale of an asset. An indemnity clause is worth having, but an indemnity is only ever as good as the person giving it.
What if they ran up debt after separation?
Debt taken on after the separation date is generally that person's own responsibility, unless it went to maintaining family property. The separation date is therefore as important for debt as it is for property.
Pull the statements early. Close or freeze joint credit as soon as the relationship ends, and get written confirmation from the lender rather than relying on an assurance from your former spouse.
What about the mortgage and the family home?
A mortgage is family debt, and it comes off the value of the home when the equity is calculated. Where one spouse keeps the home, the usual approach is a refinance that removes the other from the mortgage and pays out their share.
If the remaining spouse cannot qualify alone, that has to be known early, because it often determines whether the home can be kept at all. Consider a mortgage broker's opinion before the terms are agreed.
“She is extremely knowledgeable, and an experienced family law lawyer. I would highly recommend her to those who are looking for an experienced family law lawyer to deal with all family law matters.”
How we can help
- 01 Identifying and valuing family debt, and separating it from post separation debt
- 02 Agreement terms that remove a name from joint credit rather than relying on a promise
- 03 Refinancing and buyout terms for the family home
- 04 Claims for unequal division of debt where equal sharing would be significantly unfair
- 05 Coordinating debt with property division and support so the same money is not counted twice
- 06 Advice where a former spouse's insolvency affects your exposure
The path a matter takes
Every file is different, but the shape is usually the same. Timings are typical, not promised.
01
First conversation
What has happened, what you want, and what the law actually allows.
Week one
02
Disclosure
Income, property and debt on the table for both sides. Nothing moves without it.
Weeks 2-8
03
Negotiation or mediation
Most matters resolve here, in writing, without a courtroom.
Months 2-6
04
Agreement or order
Terms signed, or filed with the court so they can be enforced.
On resolution
Frequently asked questions
Am I responsible for debt that is only in my spouse's name?
Between the two of you, yes, where it is family debt. Debt taken on during the relationship is shared equally regardless of whose name it is in.
What about a joint line of credit?
Both borrowers are fully liable to the lender for the whole balance. Freeze or close it as soon as you separate, and deal with the outstanding balance as part of the overall settlement.
What if my spouse ran up debt after we separated?
Post separation debt is usually that spouse's own responsibility, unless it was used to maintain family property such as mortgage payments or repairs on the family home. The separation date is what determines this.
Does a creditor have to follow our separation agreement?
No. Your agreement governs the two of you. A lender can still pursue any borrower or guarantor named on the loan, which is why removing your name matters more than an indemnity clause.
What happens with the mortgage if one of us keeps the house?
Usually a refinance in the remaining spouse's name alone, paying out the other's share of the equity. Confirm early whether that spouse can qualify, because the answer often decides whether the home is kept.
What about student loans?
A student loan taken on during the relationship can be family debt, though it is also an argument for unequal division where the education benefits only one spouse. It is fact specific.
Can debt be divided unequally?
Yes, where an equal division would be significantly unfair. Debt incurred recklessly or hidden from the other spouse is the kind of circumstance that supports an unequal division.
This page is general information about family law in British Columbia. It is not legal advice for your situation, and the law changes. Speak with a lawyer about the facts of your own matter.
