Dividing Property and Debts After Separation in British Columbia

Married spouses or couples who have lived together in a marriage-like relationship for at least two years must follow the same rules when dividing property and debts in British Columbia.

After separation, all family property and debts must be divided equally between spouses unless that would create a significantly unfair disparity. Any excluded property brought into the relationship is not subject to division.

Property and debt division can be a significant bone of contention when relationships break down so it’s best to understand the details about how to divide property and debt legally in BC…

How are family property and family debt divided in BC?

Under BC law, all family property accrued during the marriage, as well as any family debt incurred, must be divided equally at the time of separation or divorce.

In reality, spouses can divide property any way they like. If an agreement on property division between spouses is made as part of the divorce settlement, as is common, the court will likely only need to approve this before the divorce is granted. However, if a claim is made by either spouse and a judge needs to intervene, decisions will be made according to the provisions of the Family Law Act in BC, which dictates an equal division of family property when spouses separate or divorce.

What’s considered family property in BC?

Family property includes all assets owned jointly by spouses on the date that they separate and excludes separate property.

This may include:

• Real property, including the family home
• Businesses
• Savings and investments
• Retirement accounts and pensions
• Insurance policies
• The increase in value of any excluded property since the relationship started
• Vehicles
• Art of jewelry collections
• Pets

It should be noted that the same family property division rules apply regardless of who has title to the property.

Excluded property owned before marriage in British Columbia

Assets owned by either spouse before the marriage or marriage-like relationship started are generally considered “excluded” property in BC, according to the Family Law Act. Typically, this includes the following:

• Property owned before the marriage started
• Any gifts or inheritance intended for only one spouse
• Money paid or payable under an insurance policy
• Property that was purchased with excluded property

Importantly, this property is not subject to the same equal division laws upon separation.

Only the increase in the property’s value during the relationship may be divided. So, for example, if one spouse owned an apartment that increased in value by $50,000 during the period of the marriage, the spouses may need to split this increase down the middle ($25,000 each) upon separation.

Crucially, in some cases, the excluded property remains “excluded” even if it is placed in both spouses’ names. However, the court has the discretion to amend such arrangements if a claim is made, and allocating the property to the original owner would create an unfair situation.

Property valuations during the division process can be complex and intricate. Professional assistance from property division lawyers or forensic accountants may be required, especially with large, complex estates.

How is family debt divided?

Any outstanding debt owed by either spouse in a marriage must generally be split down the middle at the time of separation—plus any debts incurred after the date of separation if the money was used for the benefit of family property.

This may include:

• A mortgage
• Any loans from banks, family members, etc.
• Bank overdrafts
• Credit card debts
• Income tax debt
• Outstanding repair bills for family property

The debt is generally considered to have been incurred by both partners in the marriage, even if only one spouse signed for it. However, this may be assessed by judges on a case-by-case basis, depending on circumstances. For instance, it may be unfair to make both spouses share the repayments for one spouse’s reckless gambling debt. If the assets and debts are of a significant value, as in many high-net-worth divorces, property division calculations can become even more complex. Attempting this without legal assistance is generally inadvisable.

Can you be forced to pay your ex-spouse’s debt by creditors in BC?

Generally speaking, in BC, creditors are only authorized to claim payments from the person who signed for the debt. Joint debts that both couples sign for may be pursued through only one spouse.

For separated couples with outstanding debts, it’s best to address these issues upfront by informing any creditors that you have separated. Another advisable step is to start separating your finances from the day you separate.

How to start separating finances after separation

If you operated a joint account as a married couple, start using separate accounts and reduce or cancel the overdraft facility on the main account. Request that the bank requires two signatures to withdraw money if possible.

Cancel any joint credit card accounts and also any secondary accounts where you are the primary cardholder and your spouse has a second card. If you need credit, open a new line of credit with your bank in your name alone.

After a separation or divorce, you may also need to review the nominated beneficiaries listed on your investments, retirement accounts, insurance policies or last will.

A seasoned divorce lawyer can help untangle the normal financial complexities that result after spouses decide to go their separate ways.

When are property and debt divided unequally in BC?

In most cases, the standard property division laws from the Family Law Act apply. The main purpose of these laws is to establish a fair settlement when spouses separate and to avoid conflict.

If following these laws to the letter with a 50-50 split would result in a significantly unfair outcome, the Court can deviate from the norm.

For instance, after considering the length of the relationship, the roles of each spouse, any verbal agreements made, the value of the family debt, how the debt was incurred, and each spouse’s ability to repay it, a judge might order that a 50-50 division of the debt would be unfair.

This is especially the case if one of the spouses acted to increase or lower the family debt or property value after separation.

Any legally enforceable marriage agreements may come into play during the decision-making process, too. Remember, spouses can agree to any property division they like. However, if the matter ends up in dispute and goes to court, a judge may make decisions that one or both spouses don’t like. It’s often advisable to seek legal assistance to prevent this.

How long do spouses have to divide family property or debt in BC?

According to BC law, married spouses have two years from the date they receive an order for divorce or annulment from the BC Supreme Court to divide family property or debt.

For spouses in a common-law relationship, the time limit for dividing property and debt is two years from the date of separation.

If you need legal assistance with property division or any other aspect of divorce in the Langley area of British Columbia, DSG Family Law offers a free initial consultation to assess your situation and outline your legal options. Speak with a family lawyer today.