Debt and Divorce in Ontario: Who Pays for Shared Debts?

Divorce is stressful, and debt can make it even worse. Many couples assume that when they separate, their debts will automatically be split evenly - but that’s not always the case. Credit cards, mortgages, car loans - who’s responsible for paying them off? And what happens if your ex refuses to pay their share?

If you’re going through a divorce in Ontario, understanding how debt is divided can help you avoid costly surprises. Let’s break down what you need to know and how to protect yourself.

Key Takeaways

• Debts accumulated during marriage are shared, even if they’re in one spouse’s name.
• Ontario uses the Net Family Property (NFP) system to determine how debts are split.
• Debts after separation are usually not shared, except in certain cases.
• Joint accounts remain a shared responsibility until closed or modified.
• Legal and financial steps can help protect you from being unfairly burdened.

How Is Debt Divided in an Ontario Divorce?

In Ontario, debts are treated like assets under the Family Law Act. This means that debts incurred during the marriage are generally split between spouses, regardless of whose name is on the account.

The Equalization Process

• Calculate Net Family Property (NFP): Each spouse determines their total assets minus debts on the date of separation.
• Equalization Payment: The spouse with the higher NFP pays half the difference to the other spouse. Debts reduce the NFP, lowering potential equalization payments.

What Debts Are Considered Shared?

Any debt taken on during the marriage is typically shared, including:

• Credit cards
• Mortgages
• Car loans
• Personal loans
• Lines of credit

Even if only one spouse’s name is on the debt, it may still be considered a marital liability.

What About Debts After Separation?

Generally, debts incurred after separation are not shared. However, there are exceptions:

• Joint Accounts: If both spouses remain on a joint credit card or loan, they are both responsible for the debt, even after separating.
• Necessary Expenses: If one spouse takes on debt for essentials like childcare or household bills, it may still be considered a shared obligation.

What If Your Ex Won’t Pay Their Share?

If your former spouse refuses to take responsibility for their portion of the debt, consider these steps:

• Document Everything: Keep records of agreements, court orders, and communication regarding debt.
• Seek Legal Advice: A family lawyer can help enforce debt repayment through legal channels.
• Try Mediation: Mediation can be a cost-effective way to resolve financial disputes outside of court.

How to Protect Yourself from Debt in Divorce

Taking proactive steps can help you avoid being unfairly burdened with debt after divorce:

• Close Joint Accounts: If possible, close or separate any shared accounts to prevent new debt from being added.
• Monitor Your Credit Report: Regularly check for unauthorized debts under your name.
• Get Professional Advice: Consult a family lawyer or financial expert for tailored guidance.
• Keep Financial Records: Maintain copies of bank statements, loan agreements, and credit reports.

Secure a Fair Financial Future

Divorce and debt can be a difficult mix, but you don’t have to handle it alone. Braystone Mediation helps couples resolve financial disputes fairly and efficiently. With our flat-fee structure, you won’t have to worry about mounting legal costs.

If you need help settling debt-related issues, reach out today and take the first step toward financial peace of mind.