How Are Debts Divided When a Couple Separates in Manitoba?

When a relationship ends, many people worry as much about what they owe as about what they own. A credit card in one name, a car loan, or a joint line of credit can feel like a threat to your financial future.

This article explains how Manitoba's family property rules deal with the accounting between spouses, where debts fit into the process, and what you can do now to protect yourself. It is general information, and the way a specific debt is treated depends on your circumstances.

This article covers the law of Manitoba.

Start with the accounting, not the name on the debt

Under The Family Property Act, each spouse and common-law partner has the right, on application, to an accounting and, subject to section 14, an equalization of assets. The combined value is divided into two equal shares unless section 14 orders otherwise.

For family assets, the court may change equal sharing only if equalization would be grossly unfair or unconscionable. For commercial assets the threshold is lower: the court asks whether equal sharing would be clearly inequitable. How debts are treated in that process, including a debt in only one person's name or a debt you signed for jointly, depends on your situation, so it is worth confirming with a lawyer.

Disclosure: debts must be on the table

Property claims are made to the Court of King's Bench. The person applying must file and serve a sworn statement of assets and liabilities, and the other person has 14 days to respond with a similar statement. Liabilities are the debts you owe, so both sides are expected to set them out.

For family court generally, the steps include completing Form 70D financial statements with three years of tax returns, and Form 70D.5 if property is in issue. Gathering your debt records early makes these steps easier.

• Credit card statements, in your name or joint
• Personal loans, vehicle loans and student loans
• Lines of credit, secured or unsecured
• Mortgages and any other debt tied to the home
• Money owed to the Canada Revenue Agency or to family members

Family assets, commercial assets and how the court can adjust the split

The Act separates assets into two groups. A family asset is one owned by either or both spouses and used for shelter, transportation, or household, educational, recreational, social or aesthetic purposes, including the family home. A commercial asset is any asset that is not a family asset.

The groups matter because the court can depart from equal sharing more easily for one than the other. For family assets, equal sharing may be changed only if equalization would be grossly unfair or unconscionable. For commercial assets, the threshold is lower: clearly inequitable, with factors such as length of cohabitation, length of separation and any agreement considered.

How a particular loan or credit balance is counted within this framework depends on what it was used for and on the evidence. This is a good question to put to a lawyer or accountant with your statements in hand.

Agreements, spending and time limits

• Agreements: the Act does not apply to an asset dealt with by a spousal agreement or common-law relationship agreement, but assets the agreement does not address remain subject to the Act.
• Independent advice: a separation agreement is a binding contract, so Manitoba guidance says both people should have independent legal advice. A court is unlikely to interfere with a bad bargain, though it may set an agreement aside where fraud or unfair pressure is shown.
• Conduct: conduct is disregarded in dividing property unless it amounts to dissipation. There are two years from the transfer or dissipation, or its discovery, to challenge dissipation or excessive gifts.
• Common-law partners: they are covered by the same equal-sharing accounting once they are registered or have lived together three years. Couples who had cohabited three years and separated before section 2.1 came into force are generally excluded, unless they resumed cohabiting and then registered or cohabited at least 90 days after that date.
• Time limit: an application generally may not be made more than 60 days after the divorce becomes absolute or takes effect, though the court may extend this in specified circumstances. For common-law partners, the period is 60 days from registration of the dissolution if registered, or three years from when they began to live separate and apart if unregistered.

Because these deadlines can end your rights, check your own timing early rather than waiting.

What to do next

• List every debt, with the lender, balance, whose name it is in, and what it was used for.
• Collect statements from before and after the date you separated.
• Note any large purchases, transfers or gifts that worry you, and when you found out about them.
• Do not sign an agreement about debts until you have had independent legal advice.
• Ask a lawyer to confirm how your debts would be treated and what deadlines apply to you.
• Contact your lenders about your own accounts, and consider whether joint accounts need to be reviewed.

Manitoba guidance recommends, though does not require, a written separation agreement, family arbitration award or court order when there are children or issues about property or financial support.

Frequently asked questions