Common Law Partner Debt in BC and Who Has to Pay It

If you lived in a marriage-like relationship for at least two years, debt either of you took on during the relationship is family debt under section 86 of the Family Law Act, and on separation each of you is equally responsible for it, whichever name is on the account.

That rule surprises people more than the property rule does. SiLaw Group Family Lawyers sees it most often with credit cards, lines of credit and vehicle loans that one partner ran up and the other never knew the size of. Our common law property rights page covers the property side of the same regime, and our family debt page covers the service.

What Counts as Family Debt Under the Family Law Act?

Section 86 of the Family Law Act defines family debt as all financial obligations incurred by a spouse during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and, after the date of separation, obligations incurred for the purpose of maintaining family property. The definition turns on timing and purpose, not on whose name is on the paperwork and not on what the money was spent on.

Both ends of that period are facts to be proven. The relationship begins, under section 3(3) of the Family Law Act, on the date the couple began living together in a marriage-like relationship. It ends at separation, which under section 3(4) of the Act can happen while you still share a home. A credit line opened a month before you moved in is outside the window. One opened a month after you separated is outside it too, unless it paid for the mortgage or repairs on the family home.

Who Pays Family Debt When Common Law Partners Separate?

Both of you, equally, as a starting point. Section 81 of the Family Law Act provides that spouses are both entitled to family property and responsible for family debt regardless of their respective use or contribution, and that on separation each spouse is equally responsible for family debt. That is subject to an agreement or order that provides otherwise, and to the Act's exceptions, but the default is a 50/50 split of the family debt alongside the 50/50 split of family property.

Does the Bank Care Who the Family Law Act Says Should Pay?

No. Section 82 of the Family Law Act says nothing in Part 5 affects the rights and remedies of a spouse's creditors, guarantors or assignees in relation to family debt. The lender's contract is with whoever signed it. If the car loan is in your name and the Act makes your former partner responsible for half, the bank still collects from you, and your remedy is against your partner.

The Act gives the court tools for that. Under section 97(2)(h) of the Family Law Act, the Supreme Court of British Columbia may declare that one spouse is responsible for payment of an item of family debt and must indemnify the other spouse for it, and under section 97(2)(i) of the Act it may order the sale of property to pay a debt. Section 97(3) confirms that an order about family debt applies only as between the spouses and does not affect an agreement between a spouse and anyone else. Refinancing, paying out and closing joint accounts, where possible, is therefore part of nearly every settlement. Our guide to separating your finances walks through the practical steps.

Can Family Debt Be Divided Unequally?

Yes, in two ways. The first is by agreement. Section 92(a) of the Family Law Act allows spouses to agree to divide family debt equally or unequally, and section 92(b) and (c) of the Act allow them to include or exclude specific debts. A cohabitation agreement can set debt rules in advance, and a separation agreement can set them afterwards.

The second is by court order. Under section 95(1) of the Family Law Act, the Supreme Court of British Columbia may order an unequal division of family debt, or family property, or both, if equal division would be significantly unfair. Among the factors in section 95(2) of the Act, three speak directly to debt: whether the family debt was incurred in the normal course of the relationship, the ability of each spouse to pay a share of the family debt if the debt exceeds the value of the family property, and whether a spouse after separation caused a significant increase in family debt beyond market trends. Gambling losses, secret spending or debt run up after separation are the kinds of facts that get argued under those factors, and the threshold is significantly unfair, not merely unfair. Our unequal division page explains how high that bar sits.