Debt acquired post separation: Who’s responsible?

Last month we talked about the treatment of debt acquired during the course of a relationship and how this is to be treated during a divorce or separation. What we didn’t talk about was the treatment of a separate category of debt; that is, debt acquired by one of the partners after they have separated but before their divorce or legal separation has been finalized.

If you haven’t already done so, please go back and review the first part of this topic: Am I responsible for my partner’s debt?. Here you will find important background information on the Family Property Act (FPA), who it applies to, and the treatment of “debt” as property.

 

The current law:

For the purpose of this blog topic section 7(2.1) of the Family Property Act (FPA) is relevant and outlines the applicable date for assessing the value of property as being the date of trial. This means that any debt acquired post separation, but before legal separation or divorce is finalized, is to be included in the valuation of property for division.

In addition to the above the words “just and equitable” once again come in to play when considering property acquired post separation. As a reminder, these words provide the court with discretion when considering the division of property. In determining what is “just and equitable” courts will look to s. 8 of the FPA. These are the same factors used when considering the division of debt incurred during the course of a relationship.

 

Wondering what the courts consider “just and equitable”?

In 2002 the Alberta Court of Queen’s Bench (ABQB) examined a case in which the parties divorcing owned and operated a farm which included land, crops, buildings etc. The court had to consider the appropriate date for valuing debt, in this case, a jointly held mortgage. The date to be used was significant because, post separation, one of the parties had made payments which had reduced the total amount owing. In this case, the court determined that the date of separation, not the date of trial, was the proper date to use. This meant that the original and higher mortgage balance was divided between the parties. As a result, the payments made by one party post separation stood to benefit that party only.

In a separate 2006 case the ABQB had to decide how debt acquired post separation would be treated. The court determined that debt incurred post separation was in fact matrimonial property meaning it was to be included in the division of property, however, the analysis didn’t stop here. The court ended up determining that there were two reasons why the facts of this case made it one in which an unequal allocation was justified. First, the debt accumulated had not created or resulted in an accompanying asset. Second, the debt was not a necessary consequence resulting from the breakdown of the marriage.

If you are unsure or concerned about how debt accumulated post separation will be treated during your divorce or separation, we’re here to help. At Hayes-Fry law we have extensive experience helping parties navigating this type of challenge and will work with you to assess and understand your unique circumstances. Give our office a call today at 780.831.7370 or email reception@HayesFryLaw.ca to book a consultation.

 

The following resources were relied on in the preparation of this blog:

  1. Family Property Act, RSA 2000, c F-4.7.
  2. Busenius v. Busenius, 2006 ABQB 162.
  3. Coulthard v. Coulthard, 2002 ABQB 695.