During any divorce process, dividing property, assets, and debt is often a major point of contention. Unfortunately, nearly 40% of all marriages end in divorce within Canada, with financial issues being cited as one of the top reasons for divorce or separation. With this in mind, it is no surprise that a couple already at odds may find the process of equally dividing property quite difficult. Although some couples are able to reach an agreement regarding their shared finances outside of the courthouse, this is not always a possibility for every marriage.
Regardless of how couples choose to move forward with their divorce and separate their finances, it is important to be informed on various divorce subjects before finalizing any decision. For this reason, Anthony Macri, Ontario lawyer and family attorney, hopes to discuss with readers the intricacies of property division and debt during a divorce and answer some of the most asked questions regarding these topics.
How Will Courts Divide Property and Debt in a Divorce?
If a couple who is legally married decides to pursue a divorce, there are laws in place which dictate how the property and debt between the couple will be divided.
In any divorce, Canadian law divides a property into two sections: family property and excluded property.
Family property is defined as anything the couple owned on the date they separated, such as:
- Family home; land, houses, condos, apartments, etc.
- Investments
- Bank accounts
- RRSPs
- Insurance policies
- Pensions
- Businesses
Regardless of whether or not one spouse’s name is documented on any legal documents, the law still defines the asset as family property. However, any property an individual owned before their spouse lived with them is called excluded property. This means that excluded property is:
- Solely the property of one individual
- That the individual does not have to split the value of the asset with their partner when they separate or divorce
An important exception is the matrimonial home. If an individual owned the matrimonial home on the date of marriage, and they continue to live in it throughout the marriage, then the value of that home is included in the parties’ net family property and the value of it must be shared. However, if the parties change homes during the marriage, then the value of the matrimonial home on the date of marriage is excluded from the owner’s net family property.
Ontario lawyer Anthony Macri states that while a property purchased before marriage is the sole property of an individual, any interest an excluded property obtained while the couple is living together is not given excluded status. As a result, any interest must be equally divided between the couple during separation.
For example, if an individual purchased an apartment before their marriage, they would not be required to give their ex-spouse half of the rental property’s total value. However, if the apartment’s value had increased since the date the couple moved in together, the apartment owner would need to give their ex half of the increase in value.
Who Gets to Stay in the Marital House During a Divorce?
In Canada, when a married couple separates or divorces, each person has an equal right to stay in the matrimonial home. For this reason, either party is not allowed to sell, mortgage, or rent the house without the go-ahead from the other spouse unless one spouse has a court order that allows them to do so. If a couple who are not married separate, such as a common-law couple, they will not have the same rights as a married couple, and generally, any property a person owned prior to the relationship will remain their own. If one individual bought the home the common-law couple lived in during the duration of their relationship; they will be able to stay in the house after the separation. However, if both names are on the title, the common-law couple will need to sell the home or have one partner will need to buy the other out. If the couple cannot reach an agreement on how best to divide their shared assets, they will need to hire a lawyer to help legally divide the property or other assets.
Understanding Debt During Divorce
Preferably, a couple will have kept their debt separate during the marriage or have split their debts prior to the divorce. However, if they haven’t made these arrangements, then legally, the debt resolution and repayment will be left to the courts, which may split the debt between the spouses.
However, from the perspective of the lender or creditor, the person who is documented as borrowing the money is still legally and financially responsible for paying the debt. Regardless of if one spouse took out the loan while the other spouse used the funds, the person who took out the loan will be held responsible after the divorce.
Ontario lawyer Anthony Macri states that while the courts will ultimately be responsible for dividing marital debt during the divorce, this will not affect any creditor and lender’s decision to hold the individual who borrowed the money accountable.
