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How Does Debt Work In An Ontario Divorce Case?


If you are contemplating divorce or involved in a pending case, you probably already know that one of the key issues in the proceedings is how to divide property. The Ontario Family Law Act requires equalization of net family property, which generally aims to ensure both parties walk away from the marriage on a relatively similar financial footing. Under the law, marriage is considered a partnership. All assets acquired during the marriage belong to both spouses, so they must be split between the parties as close to equal as possible.

However, what many people do not realize is that the definition of net family property (NFP) includes debts and other liabilities. These obligations are also subject to equalization, and the challenges you may encounter are similar to evaluating assets for purposes of divorce. It is wise to trust a Mississauga property division lawyer to assist with details, but some information on how to divide debts in divorce is useful. 

Steps to Dividing Debts in Divorce 

As an overview, the process of NFP equalization involves taking each spouse’s assets and debts – not including items that are individual property or obligations. Their respective amounts are compared, and the party with the highest total pays half the difference. However, the specific steps including:

  • Each party will complete Form 13.1, Financial Statement and Disclosure. In it, you will provide information on all assets, minus debts. The date of separation is the key for establishing value.
  • You must determine what assets were in your name before the wedding date, and these are subtracted from your NFP.
  • You will also separate out any debts or legal obligations that you owed before getting married, and these liabilities stay with you individually.
  • For any debts the spouses share, they will split these equally at the conclusion of divorce proceedings.
  • Once all assets and joint debts are added up and attributed to each spouse, there may be a difference in the values of NFP. This amount is split in half, and the person with the higher sum pays an equalization payment to the other. 

Factors a Judge Reviews for Division of Debts 

There are some situations where the equalization rule does not apply, and they are usually linked to misconduct by one spouse. For instance, a judge may order an unequal distribution of NFP if:

  • One party failed to disclose a significant amount of debt to the other before getting married.
  • A spouse intentionally incurred debt or legal obligations to deplete the value of NFP.
  • One party incurred substantial debt for purposes of supporting the family.
  • There is a prenuptial agreement regarding how to handle debt in divorce. 

Our Mississauga, ON Property Division Lawyers Can Provide Additional Details

For more information on how Ontario divorce laws apply to the dividing marital debts, please contact Zagazeta Garcia Lawyers LLP. You can call 905-232-0398 or visit our website to set up a free consultation. Our Mississauga office serves clients in Brampton and throughout the Peel Region, so we are ready to take on the challenges involved with property division.



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