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What is the process for dividing debts in a divorce?

Divorce can be a challenging time, especially when it comes to dividing up assets and debts. In Ontario, the process for dividing debts in a divorce involves several steps. Here is an overview of the process for dividing debts in a divorce:

1. Identify and List All Debts

The first step in dividing debts in a divorce is to identify and list all debts that were incurred during the marriage. This can include credit card debt, loans, mortgages, lines of credit, and any other debts that were incurred jointly or individually during the marriage. It is important to gather all relevant documentation, such as credit card statements and loan agreements, to ensure that all debts are accounted for.

2. Determine the Ownership of the Debt

Once all debts have been identified and listed, the next step is to determine the ownership of the debt. This means determining which spouse incurred the debt or whether it was incurred jointly. Debts incurred in one spouse’s name will typically be the responsibility of that spouse, while joint debts will be the responsibility of both spouses.

3. Consider Pre-Marriage Debts

If one spouse had debts before the marriage, those debts are considered separate property and will not be divided in the divorce. However, any debts incurred during the marriage, even if they are related to pre-marriage debts, may still be subject to division. For example, if one spouse incurred a debt before the marriage but then used marital assets to pay off the debt during the marriage, the debt may be considered a joint debt.

4. Determine the Division of Joint Debts

If a debt was incurred jointly during the marriage, it will be divided between the spouses. The division of joint debts can be done in several ways, including:

  • Equal division: The debt is divided equally between the spouses. This is the most common approach to dividing debts in a divorce.
  • Proportional division: The debt is divided based on each spouse’s income or contribution to the debt. For example, if one spouse earned significantly more income than the other spouse, they may be responsible for a larger portion of the debt.
  • Partial division: One spouse takes responsibility for a portion of the debt, and the other spouse takes responsibility for the rest. This approach is typically used when one spouse has a higher earning capacity than the other or when one spouse received a greater share of the assets in the divorce settlement.
Negotiate a Settlement

If both spouses can agree on how to divide the debts, they can negotiate a settlement agreement. The agreement should be put in writing and signed by both parties. It is essential to seek legal advice before signing any settlement agreement to ensure that the division of debts is fair and reasonable.

Court Order

If the spouses cannot agree on how to divide the debts, they can apply to the court for a court order. The court will review the debts and make a decision about how they should be divided. Going to court can be costly and time-consuming, but it may be necessary if the spouses cannot reach an agreement on their own.

In conclusion, dividing debts in a divorce in Ontario involves identifying and listing all debts, determining the ownership of the debt, considering pre-marriage debts, determining the division of joint debts, negotiating a settlement, and obtaining a court order if necessary. TCZ lawyer Eric Zhao can give legal advice to ensure that the division of debts is fair and reasonable. We can also help to negotiate a settlement or represent a spouse in court if necessary.