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Avoid These Excluded Property Mistakes

Vancouver Family Debt Division Lawyers help separating spouse’s in BC fairly divide and allocate responsibility for Vancouver BC family debt. Many debts are family debts but not all debt is family debt. In rare cases, even family debt can be allocating unequally between the two separated spouses. Sometimes, one spouse may call a loan to buy a home a debt when, in reality, it was a gift. An example of this might be where in-law parent’s of a separating spouse no longer want to share the money they gifted for a downpayment as they now want to claw it back as a loan instead. Rana Yavari explains some basic Family debt division principles in today’s blog.

Family debt is defined under section 86 of the Family Law Act as all debts or financial obligations incurred by either spouse during the course of their relationship (the earlier of the start of cohabitation or marriage through to separation). In contrast, all debts or financial obligations incurred before and after separation are not family debts, unless the debt has been incurred for the purpose of maintaining family property. ( think of someone paying for mortgages, car loans, children’s school fees, etc after separation). The area is complicated so why not contact us for a consultation so you can learn the rules that apply in your specific case.

Vancouver Family Debt Division Lawyers Call 1 877 602 9900

BC family debts that are family and not wholly personal to one spouse in nature can involve the following:

    • Bank lines of credit or overdrafts, credit cards;
    • Income tax debts;
    • Mortgages;
    • A loan from family members; and
    • Repair costs.
    • distributive taxes
    • real estate commissions

Vancouver Family Debt Division Lawyers Significantly Unfair Call 1 877 602 9900

Vancouver Family Debt Division Lawyers note that each spouse is presumed to be liable for one-half of all family debt. If the equal division of family debt is “significantly unfair” ( note, this test has a very high threshold you have to meet to succeed), the division may be adjusted under section 95(2) of the Family Law Act.  Vancouver Family Debt Division Lawyers explain that some factors the court will consider include:

    • whether family debt was incurred in the normal course of the relationship between the spouses;
    • if the amount of family debt exceeds the value of the family property, the ability of each spouse to pay a share of the family debt;
    • whether a spouse, after the date of separation, caused a significant decrease or increase in the value of the family property or family debt beyond market trends;
    • whether a spouse substantially reduced the value of the family property, or
    • whether a spouse disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse’s interest in the property or family property to be defeated or adversely affected; and
    • a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order.

Examples where courts found significant unfairness and ordered an unequal division of family debt include:

    • a spouse incurred gambling debts and losses during the marriage and the court found that the spouse squandered family assets by gambling and there was to be reapportionment in the other spouse’s favour of 55% of net equity in the home (Vitug v. Vitug 2013 BCSC 405)
    • a spouse who withdrew and retained $90,000 from a joint line of credit prior to separation was liable for the withdrawn funds, and the court divided the family debt unequally (Mohammadi v Mohammadi 2016 BCSC 1873)

No significant unfairness and equal division of family debt ordered cases include:

    • the claimant had paid the mortgage since separation, but there was no evidence that the claimant had increased the value of the property “beyond market trends” and, more significantly, the claimant had had the benefit of occupying the former matrimonial home without any compensation to the respondent, who had had to pay for his accommodation ( (S.D.) v. M. (B.R.), 2018 BCSC 1473)
    • One spouse was responsible for investment decisions (with losses) with the consent of the other ( (J.S.) v. F. (W.W.), 2015 BCSC 2375)
    • The parties did not separate their finances during their six-year separation and continued to use the joint lines of credit as they had before. The court inferred an agreement about financial arrangements from the parties’ conduct, finding that they agreed to “continue the financial arrangements that existed prior to their physical separation”, and that it was not “appropriate, reasonable, or practical for the parties to now ask the [c]ourt to review six years of expenditures in order to determine who may have obtained the greater benefit from that implied agreement” (Yip v. Yip, 2016 BCSC 1595).

Post-Separation Pay Down of Debt Gets Credit

The court in Bilawchuk v. Bilawchuck, 2014 BCSC 2067 held that the reduction of family debt post-separation but before the hearing may not relieve the other spouse from the obligation to share in the family debt that existed at separation. However, it may be appropriate to divide the value of debt at the date of the trial if one spouse solely paid the debt associated with an asset and had exclusive use of the asset.

Vancouver Family Property Lawyers at MacLean Law are standing by to assist you so Call 1 877 602 9900.