Who Pays the Debts After a Common-Law Separation in BC?

Debts are often the harder part of separating. A credit card may be in one name, a car loan in another, and a line of credit may have funded the household for years.

In BC, whose name is on a debt is not the whole story. This article explains the general rules for qualifying common-law couples and how they can be adjusted.

This article covers the law of British Columbia.

Who these rules apply to

Property division rules apply to unmarried couples who have lived together in a marriage-like relationship for at least two years, and couples can opt out by agreement. Before 2013, unmarried couples could not ask a court to divide property under the family property legislation; since the Family Law Act, qualifying couples can.

A couple together less than 2 years with a child is a spouse for support and parenting, but not for property division.

• A person is a spouse if married, or if they have lived with another person in a marriage-like relationship for a continuous period of at least 2 years.
• The relationship is counted from the earlier of the date you began living together in a marriage-like relationship and the date of marriage, not from the end of the two years.
• A spouse includes a former spouse.
• Parenting, support and family-safety rules generally apply to both married and unmarried couples.

You can be separated while still living in the same home. The court may treat as evidence of separation one spouse communicating an intention to separate permanently, or an action showing that intention. Spouses are not treated as having separated if, within one year after separating, they resume living together primarily to reconcile and live together for periods totalling at least 90 days.

What counts as family debt

Family debt covers financial obligations a spouse incurred during the relationship up to separation, and certain post-separation debts incurred to maintain family property. Spouses are generally equally entitled to and responsible for family property and family debt.

This means a credit card, loan or car payment in one partner's name may still be family debt if it was taken on during the relationship. Debts from before the relationship are a different question and depend on the facts.

Debts are usually looked at alongside property. Family property is property owned by at least one spouse, or in which at least one spouse has a beneficial interest, on the date of separation, and it includes bank account money and business interests. Excluded property, such as property acquired before the relationship, inheritances and gifts from third parties, is not family property. A spouse who claims that property is excluded must prove it.

The increase in value of excluded property since the later of the date the relationship began and the date the property was acquired is family property, except that the increase does not include value received from a discretionary trust. So the increase in value of a house owned before the relationship is shared, but the house's starting value is not.

When the split is not equal

Spouses may make agreements dividing property and debt equally or unequally.

• Agreement: a witnessed written agreement can be set aside only on listed grounds, such as failure to disclose significant property or debts or not understanding the agreement.
• Court order: the Supreme Court may order an unequal division if equal division would be significantly unfair.
• Factors include whether the debt arose in the normal course, ability to pay the debt over family property, bad-faith dispositions and tax liability.

Other factors the court may consider include the length of the relationship, the terms of any agreement and career contributions. The court may divide excluded property only if family property or debt located outside BC cannot practically be divided, or if not dividing it would be significantly unfair.

A court can also give effect to a division through declarations of ownership and transfers of title.

Protecting yourself during separation

A spouse can ask the Supreme Court to restrain the other spouse from disposing of property that is at issue, and the court can order an interim distribution of family property in some cases. Family property is valued at fair market value unless an agreement or order says otherwise.

If you are worried about where you will live, the Supreme Court may order a spouse exclusive occupation of the family residence for a specified period. The order is temporary and does not give a proprietary interest in the home. The court may also postpone a spouse's right to sell or encumber the family residence under such an order, and may change or end the order.

Time limits matter too. An application for property division, pension division or spousal support must generally be made within 2 years, and for unmarried spouses that period runs from the date they separated. The period is suspended while the spouses are in family dispute resolution or a prescribed process. For married spouses, the 2 years run from the date a divorce judgment is granted or a nullity order is made.

What to do next

Good records make any discussion about debt easier, whether you negotiate or go to court. Start by collecting the paperwork before the details fade.

• List every debt: lender, name on the account, balance and when it started.
• Get statements showing balances at the separation date.
• Note which debts paid for family needs and which did not.
• Do not run up new debt on joint accounts.
• Remember the 2-year time limit for applications, which for unmarried spouses runs from separation.
• Ask a family lawyer how your debts may be treated.

Frequently asked questions