What Happens to Debt After Separation

debt after separation or divorce

If you’re facing a separation or divorce, chances are the topic of finances is on your mind. While many people tend to be more focused on dividing assets and property, it is important to remember that debts will also be divided.


Who is responsible for debts after separation?


Since the law treats married couples and couples that have lived together for two or more years as spouses, debts incurred during this time become what is known as “family debt” (mortgages, loans, income tax, etc.), and generally both partners are considered equally responsible.

Regardless of whose name the debt is in or even if one partner wasn’t aware of the debt, so long as both partners are recognized by the law as spouses, this family debt is generally a shared responsibility.

Additionally, if one or both partners take on debt after the separation to take care of such family debt, then this also usually becomes a shared responsibility (eg. borrowing against a shared mortgage).


How are debts divided?


Typically, debts that were incurred during the relationship are the equal responsibility of both spouses. Without any additional agreements, this is the case most of the time. With the introduction of a prenuptial, cohabitation, or separation agreement, however, debts may be divided unequally. 

In the instance that one of these agreements exists, the agreement would generally be honoured by the courts. There may, however, be some exceptions to this where an agreement can be overturned. Some examples might include:

  • Failure of full financial disclosure
  • An agreement that significantly and unfairly favours one spouse
  • An agreement that is not in the best interests of any children involved


Can one spouse get out of shared debt responsibility?


Aside from prenuptial, cohabitation, and separation agreements, there are several instances where one spouse may not be responsible for an equal portion of the debts accrued. While they may still be entitled to shared responsibility, a judge may award unequal amounts depending on some things like:

  • How the family debt was incurred
  • The ability of each spouse to pay a share of the family debt
  • Whether after the separation, one spouse caused an increase or decrease in the family debt


Who can creditors go after for money owed?


Technically, if it’s family debt, creditors can usually go after both spouses. If a couple has their name on a joint bank account, line of credit, or credit card, for example, creditors can go after either party.

In the instance that there is only one spouse’s name on the account, then creditors will typically go after that individual exclusively, even if the amount owning is considered family debt.


How do I protect myself financially after a separation?


You can protect yourself financially after a separation if you are concerned about how assets or debts will be divided because you are unable to reach an agreement with your spouse. The best place to start with this is to:

  • Make a list of everything you own with your spouse
  • Make a note of your separation date
  • Protect any property from being sold or borrowed against (such as by filing an entry under the Land (Spouse Protection) Act, applying for a restraining order related to property under the Family Law Act, or filing a certificate of pending litigation)

A family lawyer is the most qualified to help in these situations and can advise you on the best course of action. If you have questions about what happens to your debt after separation or if you want to protect your property from being sold or borrowed against, reach out to our team of family law specialists for a complete review of all your options.





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