Dividing Property and Debt in Family Law Matters

If spouses are able to agree on how their property and debts will be divided, they can make a separation agreement setting out the terms of their agreement. However, if they can't agree the court will make an order dividing their property and debt for them after court proceedings are started.

This page talks about how property and debt is divided by the court through court orders and by spouses through separation agreements, when excluded property can be shared between spouses, when family property can be divided unequally and when the court can make orders about property located outside British Columbia.

Introduction

Whether you're able to settle how property and debt are going to be shared by agreement or if you're going to need a court order, it's important to understand how the Family Law Act works. If you're going to start a court proceeding, the court will be required to divide property using the rules set out in the act; if you're going to be able to settle your property issues, the act will be used to measure the fairness of your agreement if either of you ever try to get out of the agreement in the future.

The Plan of the Family Law Act for Property and Debt

Part 5 of the Family Law Act talks about the division of family property and family debt between spouses. It says what counts as shared family property and family debt, and which property is excluded from family property. It talks about when family property and family debt can be divided unequally and the circumstances in which excluded property may be divided between spouses. Part 6 talks about how pensions, which Part 5 says are family property, get divided between spouses. This is how Part 5 works...

• Section 97(2)(a): This section says that the court can make declarations concerning the possession and ownership of property and to make orders as may be necessary to give effect to such declarations.
• Section 106: This section says when the courts of British Columbia have the authority to divide property and debt if there is another court which also make orders dividing property and debt.
• Section 81: This section states the basic principle that when spouses separate, each spouse takes a one-half interest in family property as a tenant in common and each becomes responsible for one-half of the family debt.
• Sections 84 and 85: These sections tell you how to figure out which property is family property and which property is excluded property.
• Section 94(1): This section gives the court the authority of the court to make orders for the division of property and debt.
• Sections 95 and 95: These sections say when the court should divide excluded property between spouses and when it should divide family property unequally.
• Section 109(1): This section allows the court to make orders for the ownership and division of property outside of British Columbia.

Interestingly, there isn't a section that out and out says "the court should make orders dividing family property and family debt equally"; you have to figure this out from s. 81, which says that each spouse should have half of the family property and family debt, and from s. 94, which says that the court can make orders dividing family property and family debt.

Putting the Plan into Action

Step One

To divide property and debt under the Family Law Act, you must first decide whether you are a "spouse" as defined by s. 3(1)(a) or 3(1)(b)(i). You must either be married or have lived with your partner in a marriage-like relationship for at least two years.

If you're not a spouse, stop and read the discussion about people who don't qualify as spouses divide property under the common law relating to trusts and equity in the _____ page.

Step two

Next you need to look at any cohabitation agreement or marriage agreement that you may have signed earlier in your relationship to see whether it talks about how property or debt.

If you have an agreement about property, stop. Section 94(2) says that you cannot apply for a division of property if there's a written agreement about property or debt until that agreement is set aside.

Step Three

Next you have to check that you're making your claim within the time limits set out in s. 198(2). Married spouses must bring their claims for the division of property and debt within two years of the date of their divorce or a declaration declaring their marriage a nullity; unmarried spouses must bring their claims within two years of the date of their separation.

If you're outside the time limits, stop and talk to a lawyer whether you're within the limitation period to ask for an interest in property under the common law relating to trusts and equity.

Step Four

Now you have to figure out whether there's another court somewhere outside of British Columbia that has the authority to make an order affecting you, your spouse and your property. Most of the time the answer to this question will be no, however if:

1. you and your spouse lived somewhere else for a long time;

   you have property outside of the province; or,

   you have a cohabitation agreement or a marriage agreement that requires the laws and courts of another place to be used,

there may be a problem. If another court can make an order, you then have to figure out whether the courts of British Columbia should be hearing your case or not under s. 106.

If your case is better dealt with by another court, stop because you'll need to start a court proceeding there. If not, you can continue here

Step Five

Now you have to start sorting what you have into family property and family debt, and excluded property and personal debt. Start from the assumption that everything you have is family property and family debt and the work backwards.

Property and debt that you got after you separated is generally the separate property of each spouse, with two main exceptions:

1. property bought after separation with family property is also family property; and,
2. debt incurred after separation to maintain family property is family debt.

Property you got during your relationship is generally family property, except for certain kinds of property that are excluded from family property. These include:

1. inheritances;
2. gifts;
3. certain court awards; and,
4. certain insurance payments.

Property and debt that you got before your relationship is generally excluded property and personal debt.

Step Six

Next you need to figure out what everything is worth and where it is. This will be the hard part.

For excluded property and personal debt, what you need to know is:

• What was the value of each asset on the date you began to live together or got married, whichever was first?
• For property acquired during the relationship, when did you acquire each asset and what was it worth when you received it?
• What did you do with your property during your relationship? Is it still around? Did you sell it and buy something else?
• Do you still have any debts from before your relationship started? If so, how much did you owe on the date you began to live together or got married, whichever was first?
• Have you incurred any new debt after the date of your separation? Did you add to any debts incurred during your relationship after separation? If so, how much new debt have you racked up?

For family property and family debt, you need to know:

• What is the value of each asset now?
• Is there any property that was bought after separation with family property? If so, what is the value of those assets?
• What are the debts owed by you, by your spouse or by both of you, and how much is owing now?
• If new debt was incurred after the date of separation, was any of it incurred to pay for family property? It so, how much new debt was spent on family property?

Step Seven

Now that you've got the numbers worked out, you have to think about whether an equal division of family property and family debt would be "significantly unfair", bearing in mind the factors listed in s. 95(2). If it wouldn't be significantly unfair, then split the family property and family debt equally and go on with your life. If it would be significantly unfair, then you've got to figure out what a fair split looks like and I wish you the best of luck sorting this out in a speedy manner.

Finally, you have to think about whether there's a reason to share in some or all of the excluded property. Excluded property can be divided if there's property outside of British Columbia that ought to be family property but can't easily be divided or if it would be "significantly unfair" not to share excluded property bearing in mind the factors listed in s. 96(b). If there's no reason to share excluded property, carry on. If it there is a reason to share that property, then you've got to figure out what a fair division looks like; good luck.

Further Reading in this Chapter

• bulleted list of other pages in this chapter, linked

Page Resources and Links

Legislation

• bulleted list of linked legislation referred to in page

Family Law Act, Divorce Act, Constutution Act 1867 at least

Links

• bulleted list of linked external websites referred to in page