Are Debts Shared After Separation in Ontario?

When a relationship ends, debts matter as much as assets. People often ask whether they now owe half of their spouse's credit card or line of credit, and whether a shared mortgage stays shared.

In Ontario, there are two separate questions: how debts affect the property calculation between spouses, and who is responsible to the lender. This article keeps those apart.

How debts reduce net family property

Net family property is the value of all property a spouse owns on the valuation date, except excluded property. From that value you deduct the spouse's debts and other liabilities, and the net value of property, other than a matrimonial home, that the spouse owned on the date of marriage.

The spouse with the lower net family property is then entitled to one-half of the difference between the two. So a spouse's debts do not get split line by line. They reduce that spouse's own net family property, which changes the final equalization figure.

The valuation date is the earliest of five dates, including separation with no reasonable prospect of resuming cohabitation, the date a divorce is granted, and the day before a spouse dies.

Negative net family property and home-related debts

If a spouse's net family property comes to less than zero, it is deemed to be zero. A spouse with heavy debts therefore does not create a negative number that is then shared.

Debts tied directly to buying or significantly improving a matrimonial home are not netted against the date-of-marriage deduction. If one spouse owned the home before the marriage, the deduction is not allowed for that home, and its full value is shared.

The spouse claiming a deduction has the onus of proving it.

Debts owed to lenders: joint and individual

The property calculation does not rewrite your contract with a lender. Each person who signs a mortgage as a joint borrower is equally responsible for repaying the unpaid balance, and separation does not change that contract with the lender. A separation agreement or court order does not automatically bind the lender, so removing a name from a mortgage generally needs the lender's approval.

For debts in one spouse's name only, the contract is generally with that spouse. Check each account's terms and talk to a lawyer about your own debts.

When the court may divide unequally

A court may award more or less than half the difference, but only if equalizing would be unconscionable. Listed factors include:

• undisclosed debts
• debts incurred recklessly or in bad faith
• intentional or reckless depletion of property
• a disproportionately large share of family debts assumed by one spouse

Ontario.ca says a court can divide property unequally only in very special situations where an equal split would be extremely unfair to one spouse.

Common-law partners and what to do next

Equalization applies to married spouses and does not include unmarried cohabitants. Common-law couples are not legally required to split property acquired while living together, and property belongs to whoever bought it.

• List every debt, whose name it is in, and its balance on the valuation date.
• Provide complete disclosure: each party must serve and file a sworn statement of property, debts and other liabilities.
• If you find an error in a document you served, promptly serve the corrected information.
• Be aware that a separation agreement can be set aside if a party failed to disclose significant assets, debts or other liabilities that existed when it was made.
• Contact your lender before assuming a joint loan or mortgage can be changed.
• Ask a lawyer how your debts affect the equalization calculation.

Frequently asked questions