How Debts Are Split in a Divorce
Posted on August 28, 2024
When you are splitting up with a spouse, much of the conversation around the divorce is centred around how financial assets are split. Marital properties, income, investments, businesses and more all need to be divided fairly in alignment with Ontario law. Another factor that should be considered in regard to the complex division of assets is debts. A 2019 study found that approximately 40% of divorces in Canada were the result of increased financial strain. There is a strong link between divorce and finances. If you find yourself in a situation where debts in your marriage are a significant factor in your separation, it’s important that you seek advice from a trusted family lawyer in Toronto.
To understand how you or your spouse’s debts will be divided in divorce, contact a family lawyer who is also an experienced civil litigation lawyer at Karrass Law. Our team will take the time to carefully understand you and your spouse's financial situation and will help you get the best possible division of assets and debts. For more insight and legal advice, book a consultation with Robert Karrass and our team.
Here’s what you need to know about how debts are split in divorce in Ontario and how your family lawyer can help you get the best settlement from your divorce.
How Debts Are Classified in Ontario
In Ontario, the division of debts during a divorce follows the principle of equalization, which is designed to ensure that both spouses leave the marriage with an equal share of the net family property in a divorce. Generally, the net family property is calculated by subtracting debts and liabilities from the total value of family assets. Regardless of your assets, debts play a significant role in the division of property of assets, especially when dealing with more complex assets. When hidden assets are involved or matrimonial properties are also a factor, ensure you consult with the experienced team at Karrass Law for tailored legal advice. Our team will help protect your best interests during contentious separations and the complex division of assets.
Common Debts Incurred During Marriage
Whether a debt is shared between spouses or acquired individually, most are considered marital debts if they were incurred during the course of the marriage, as such they will often be divided equally between spouses.
Some common debts included mortgages, credit card debts, car loans, and other types of financial liabilities. However, debts that were accumulated before the marriage or after the separation date are typically excluded from this division, unless they directly benefited the family or were used to acquire family property. If you’ve acquired debts that have a more complicated purpose, talk to our civil litigation lawyers in Toronto about whether they should be factored into your division of assets. Our team will take the appropriate steps to ensure that they are properly being accounted for in your settlement and equalization payments.
It is essential to work with a knowledgeable family lawyer and civil litigation lawyer who understands the complexities of Ontario’s Family Law Act and can navigate the nuances of debt division in your divorce. A skilled family lawyer will ensure that all debts are accurately accounted for and that your interests are protected throughout the process.
What is the Difference Between Joint Debts vs. Individual Debts
One of the first questions that arises in a divorce is whether a debt is considered joint or individual.
Joint Debts
Joint debts are those that both spouses are legally responsible for, such as a mortgage or a joint credit card. Even if one spouse made the majority of payments, both spouses are typically equally liable for repaying the debt.
Individual Debts
Individual debts are those that are in one person’s name alone, either you or your spouse. These debts could include personal loans, credit cards, or business debts. In some cases, an individual debt might still be treated as a joint responsibility if it was incurred for the benefit of the family. For example, if one spouse took out a personal loan to pay for home renovations, the debt may be divided between both parties.
Navigate Debts with a Civil Litigation and Family Lawyer
The distinction between joint and individual debts is not always clear-cut, which is why it’s crucial to have a divorce lawyer or a civil litigation lawyer who can carefully examine your financial records and provide expert advice on how these debts should be handled. Your experienced civil lawyer in Toronto will help you understand which debts you are liable for and work to achieve a fair division of these obligations.
How Our Family Lawyer Assists in Debt Division
Once the debts are identified, your family lawyer will work with you to negotiate a fair division. This may involve discussions about who will assume responsibility for specific debts or how the sale of assets will be used to pay off outstanding balances. In cases where the parties cannot agree, the matter may need to be settled in court, where a civil litigation lawyer can represent your interests and advocate for a just outcome.
It’s important to note that even if a court orders one spouse to pay a particular debt, this does not release the other spouse from their legal obligation to the creditor. Therefore, your lawyer may also explore options such as refinancing or transferring debts to minimize your financial exposure. For personal insight into how to navigate debts, contact the Karrass Law team for a complimentary legal consultation.
When divorce and division of assets becomes complex, contact the experts. Our teams have years of experience with civil litigation and family law. Using our expertise we will represent your best interests to fight the most fair division of assets.
Contact us today.