When couples divorce, they may face many complicated and considerable problems. In this sluggish economy, a significant issue of great significance is the distribution of assets and debts. As the economic downturn continues, the number of couples divorcing huge debts is rapidly increasing. As a result, many family lawyers report that disputes over dissolution procedures related to debt distribution are causing more and more lawsuits. Each spouse strives to allocate as much debt as possible to the other party to protect his assets. However, the divorce rules regarding division of debt – in a dissolution or legal separation proceedings vary greatly depending on where the case occurs and the applicable state laws.
In community property states such as Ontario, the general rule is that any income or assets earned or obtained during the marriage and before the separation of either spouse is considered community property. Similarly, the same general rules apply to debts and liabilities incurred by couples during their marriage. Generally, the debts incurred by either spouse during the marriage process are still the community’s obligation. However, your family lawyer will seek exceptions; for example, specific deficits may be determined as separate debts or “anti-community debts” of one of your spouses and, therefore, will not be considered as community obligations.
Separation debts include debts incurred by the spouse before the date of marriage or separation. For example, separate debt may consist of credit card debt or pre-marriage business debt. Separate debt is considered the obligation of the individual spouse who caused such debt. However, after the marriage date, if the personal debt is repaid with community funds, the community property may be entitled to repayment during the dissolution process.
On the other hand, anti-community debt refers to debts that may occur during the marriage but not for the benefit of community property. Anti-community debts may include attorneys’ fees and any interest and fines arising from a spouse’s defence of civil or criminal proceedings against the community’s interests. The lawyer reported that the court found that misappropriation of public funds and gambling were not in society’s interests. Therefore, these anti-community debts can be borne by the spouse who assumes the obligation. As a result, the divorce lawyer of the spouse who is not responsible for the deficits is likely to make every effort to completely transfer the burden of repaying these debts to the spouse who incurred the debts.
Because of the risk of taking responsibility for such debts, each spouse should be aware of the debts that may occur to use various asset protection strategies to prevent or reduce these debts. Sometimes debt is not necessarily generated for the community’s benefit, but the community may still benefit from the debt. In this case, the community is obliged to repay the debt, not the individual spouse who bears the debt.
It is not particularly obvious what constitutes community welfare and whether the community benefits because every divorced couple has a different debt issue situation. Therefore, an experienced family lawyer should be consulted to understand whether there are community interests, community debts and which debts should be treated as separate debts. Using an asset protection lawyer before, during, and after marriage can also protect and preserve your assets.
240 Chrislea Road Suite 100
Vaughan, Ontario L4L 8V1
Phone: (905) 851-5909
$000 – $000