Vancouver Family Debt Explained By MacLean Law’s Vancouver Family Debt Lawyers
Our new Family Law Act mandates that parties are presumptively jointly liable to pay off their equal share of family debt. Our Vancouver family debt lawyers deal with disputes over whether a debt is a Vancouver family debt or one party’s sole debt. But what is a family debt that is to be paid off equally by the parties versus what type of debt is someone going to be solely liable for?
If you have a family debt issue contact us immediately so things don’t spiral out of control.
The timing of the debt can be important for example a debt incurred before or after the parties entered into or after they ended their relationship is less likely to be shared unless the debt provided a joint benefit. A debt incurred to replace the roof on a house by one party who lived in a home after separation can clearly be seen to be a joint benefit to both and is likely to be shared. Conversely a gambling debt or a stock debt used to by stocks bought after separation that tank after separation is unlikely to be a joint liability.
Equal entitlement and responsibility Under BC Family Law Act
Our BC Family Law Act defines what a family debt is:
81 Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],
(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and
(b) on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.
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.
BC Court Of Appeal Defines What Debts are Jointly Payable
Our Vancouver family debt lawyers like the BC Court of Appeal’s concise explanation of what a Vancouver family debt is in their decision Lee v. Lee where the court stated:
[34] With respect of the treatment of debts of divorcing parties, the purpose for which they were incurred was clearly relevant. In Stein v. Stein, Bastarache J., speaking for the majority, observed in connection with s. 65(1) that:
Many trial courts have recently determined that “family debts”, which are incurred for maintenance costs relating to the family, should be considered when determining reapportionment of assets. I agree that, where a debt has been incurred for use within the family unit, it is more likely appropriate to reapportion assets to account for that debt than if it were accumulated solely for use outside of the marriage. The presence of debt (regardless of whether it is “family debt”) is only one factor mentioned under s. 65(1); however, and it is, in my view, necessary for a judge to consider all of the relevant factors in order to determine whether or not the presumptive division of assets leads to unfairness. [At para. 16; emphasis added.]
[35] Thus while all debts of the parties may be considered as part of the analysis under s. 65(1), it is generally those that were incurred for the benefit of the family that are likely to lead to adjustments in the apportionment of assets in order to ensure a fair division. Again, as stated in Stein, the use of the term “family debt” to describe “a liability of either or both of the spouses which has been incurred during the marriage for a family purpose” is appropriate, even though the phrase is not used in the Act. As well, Bastarache J. noted, the very existence of the term “underlines the reality that in order to ensure fairness, both debts and assets must be considered after the breakdown of a marriage.” (At para. 10.)
[36] This principle was also enunciated by Mr. Justice Lambert in his reasons in an earlier decision of this court, Mallen v. Mallen(1992) 65 B.C.L.R. (2d) 241. He reasoned that:
The proper focus for the examination of a debt should be a focus on the nature and purpose of the borrowing and on the expenditure of the borrowed funds. If the funds were used to acquire a family asset, to maintain a family asset, to discharge a family burden, or to maintain the family members, then it is likely that equality and fairness will require an equal sharing of the debt or liability and its adjustment in the division of the assets in such a way as to carry out the principles of equality and fairness. If the funds were used entirely for the personal purposes of the spouse who borrowed them it is likely that equality and fairness will require that spouse to bear the whole burden of the debt after the triggering event. [At 243-4; emphasis added.]
More recently, this court stated in Bryan v. Chapman 2011 BCCA 278:
Whether any particular debt is a family debt or not depends upon whether there is a discernable nexus between the debt itself, and some family purpose or benefit. A debt that is incurred to acquire a family asset, to discharge a family burden, or to maintain the family will likely be considered to be a family debt, and [be] apportioned on the breakdown of the marriage: see Mallen v. Mallen(1992), 40 R.F.L. (3d) 114 (B.C.C.A.). [At para. 43.]
[37] Turning to the errors alleged in the trial judge’s treatment of the parties’ indebtedness, I do not agree that the trial judge ‘ignored’ the evidence of the parties’ free-spending lifestyle or the “balancing act” this required in terms of various lines of credit and other forms of borrowing. Indeed, the evidence of the parties’ spending habits and repeated refinancings was reviewed in some detail by the trial judge, who then summarized the pattern thus:
The fact that emerges from the evidence is that neither of the parties was particularly careful about personal spending during the marriage, and this resulted in a large burden of consumer debt, which was continually being refinanced. [At para. 60.]
This description is fully supported by the evidence.
Courts Won’t Do An Accounting Of Who Did More or Spent More Except In Extreme Cases
Our Vancouver Family Debt Lawyers also explain to our clients that courts will not do a forensic accounting of who did more or who paid more during a marriage or who was more reckless with their spending to divide property or debt unequally in their favour.
[38] At the same time, it was neither necessary nor desirable to carry out an accounting of ‘who paid what’ during the marriage: the Act does not mandate a ‘balance sheet’ approach. (See Louie v. Louie (1996) 92 A.C.W.S. (3d) 115 (B.C.S.C.), per Huddart J., as she then was.) In this marriage, as in most, each party contributed and benefited in various ways from the relationship. And, as the trial judge found, both parties here spent freely on consumer goods for their personal use – spending made possible by Ms. Lee’s covering the necessities, and by continuous borrowing orchestrated by the husband.
Call our Vancouver Family Debt Lawyers to get a clear explanation of how your family debt will be treated. Call us at any of our 4 offices located in Vancouver, Surrey, Fort St John and Kelowna BC at 1-877-602-9900.
