Am I responsible for my spouse’s debt after a divorce?

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Unfortunately, there’s no easy answer to this question. If your spouse has a debt of any kind, credit card debt, lines of credit, student loan debt, tax debts, car loans, or personal loans, you might be liable in some cases. In this blog, we talk about situations where you’re liable for debt repayment, how the court split up debt, and how to protect yourself from your spouse’s debt. Let’s begin… 

What debt will you be responsible for? 

Generally, if the debt was acquired by your spouse before marriage, then they are solely responsible for it. Then there are joint debts and co-signed loans. Joint debts are those incurred by both partners together. Common examples include joint credit cards, mortgages, and co-signed loans. In these cases, both parties are equally responsible for the debt, regardless of who incurred it or who benefited from it. If one party fails to pay, creditors can pursue the other for payment. 

This makes it clear that if your name’s not associated with the debt, you don’t have to pay it. However, sometimes Canadian family courts may hold you responsible for part of the debt, mainly student loans or credit card debt. Sometimes, the judge may feel like you have a better capacity to pay off debt and will allocate you an amount. 

How does Ontario Law split up debt in a divorce? 

When separating, you and your spouse should be able to work together to fairly and sensibly distribute the responsibility for any debts. However, if an agreement cannot be reached, a court may need to step in to make a decision.

Debts incurred by you or your spouse during the marriage, such as mortgages, credit card debts, overdrafts, lines of credit, and even loans from family members, are considered marital debts. Similar to how marital assets acquired during the marriage are divided, the court usually aims to equally distribute the responsibility for these debts between you and your former spouse. Essentially, the court views debts as shared obligations. 

This means if your spouse had student loan debt before getting married, you wouldn’t be expected to cover half of that debt. However, if they took out student loan debt after the marriage, you might be responsible for helping to pay it off.

However, there are situations where the court decides to divide debts not equally. A judge considers various factors, such as: 

  • Each spouse’s ability to pay their portion of the debt
  • Circumstances under which the debt was incurred
  • Duration of the marriage
  • Whether the debt’s value surpasses the value of any marital property
  • Existence of any legally binding agreements like a prenup or separation agreement specifying how the debt should be divided
  • Whether one spouse significantly added to the debt after the separation

While the court’s decision is important for determining how marital debt is divided, creditors focus solely on the name(s) listed on the loan agreement. They will pursue the individual(s) whose signature is on the document for payment and may take legal action if necessary to collect the debt.

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How to protect yourself from your spouse’s debt? 

While separation and divorce are emotionally consuming, you must protect yourself legally and financially. Here are some tips to protect yourself from your spouse’s debt: 

  • Remove your spouse as an authorized user on any credit card accounts to prevent new charges from being made. 
  • Continue to make on-time payments on any shared debts to protect your credit rating, even if your spouse is not contributing to payments.
  • If you’re taking on the responsibility for paying off a joint loan, consider transferring the loan into your name only through refinancing.
  • Put a hold on any accounts that both you and your spouse can access to prevent further debt from accumulating.
  • Shut down any joint bank accounts if you no longer have shared expenses.
  • Regularly review your credit report to verify that all information is current and accurate 

For more separation and divorce support, visit Sterling Law blog

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