Who Pays the Equalization Payment if Both Spouses Have Debts in Ontario?

Whether anyone pays depends on the two net family property totals, and debts reduce yours. A spouse's debts and other liabilities on the valuation date, such as lines of credit, loans and mortgages, are deducted when net family property is calculated. If the result is less than zero, it is deemed to be zero.

That means a spouse whose debts exceed their assets counts as zero in the comparison, and the other spouse does not take on any of that shortfall. The spouse with the lower net family property is entitled to one-half the difference between the two. If both of you are at zero, there is no difference to share. If only one of you is at zero, the spouse at zero is entitled to half of the other's positive total.

Debts are measured on the valuation date, which is the earliest of several dates including separation with no reasonable prospect of resuming cohabitation. The person claiming a deduction, such as date-of-marriage property, or an exclusion has to prove it. Because these calculations turn on documents and dates, a lawyer or accountant can confirm your numbers.