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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 06-30-2010, 05:41 PM
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Default Debt before marriage


There seems to be conflicting information throughout these threads.

If a person had $30000 of personal debt before getting married, and then became divorced after 2 years, does the partner have to pay half of that.

If that debt is a non-registered loan (i.e. from the parents and it is hidden in their housing line of credit and not listed with any financial institution) does that change anything?
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Old 06-30-2010, 05:58 PM
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to me the person who had the loan, considering the circumstances, should be the one to pay for all of it.
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Old 06-30-2010, 09:27 PM
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(See pages 31 - 35)


Dividing your property in Ontario

The law says that a husband and wife share responsibility for child care, household management and earning income during their marriage. In the eyes of the law, a marriage is an equal partnership. When a marriage ends, the partnership is over and property has to be divided.

To recognize the equal contribution of each person, the general rule is that the value of any property that you acquired during your marriage and that you still have when you separate must be divided equally, 50-50. Property that you brought with you into your marriage is yours to keep if your marriage ends. Any increase in the value of this property during your marriage must be shared.

There are some exceptions to these rules. The law allows you to keep some property that you have at the end of your marriage for yourself. This property is called excluded property. It includes:

• gifts you received during your marriage from someone other than your spouse;
• property that you inherited during your marriage;
• money that you received from an insurance company because someone died; and
• money that you got or that you have a right to get as a result of a personal injury, like a car accident.

The family home is another exception to the general rules. The law says that when your marriage ends, the full value of the family home must be shared even if one of you owned the home before you were married, received it as a gift or inherited it.

Unlike other types of property, you do not get to keep for yourself what the house was worth at the time of your marriage.

You and your spouse can agree to a different split. Or, in some circumstances, you can ask the court to divide things differently. The court can only divide property differently in very special situations and if a 50-50 split would be extremely unfair to one of you.

The legal rules that you have to follow to calculate the value of your property and divide it between you and your spouse can be complicated. It is a good idea to consult a lawyer about how the rules apply in your case.

The next section will give you an idea of how these rules work. Remember that this is only a description of the general rules. There may be other rules and exceptions that would apply to the facts in your case.

The first thing that you and your spouse must do is to separately calculate the total value of your share of the family property according to the rules set out in the law. You must be fair and honest when you do this. If you go to court, you must prepare a full financial report of all your property, debts and income. You must swear that it is accurate.

You can calculate your share of the family property using Steps 1-4 set out below:

Step 1: Find out the value of the property you had on the day you separated

• Your property is anything that is in your name or that belongs to you.
• You must list all your property, including property in other parts of the country and the world. For example, your list of property might include your home, a business, a car, furniture, a sound system, clothes, sports equipment, jewellery, savings in bank accounts and retirement savings plans, and your right to a pension, even if you will only get the pension years from now.
• If you own some property together in both names, you each put half the value of the property on your list.

Step 2: Subtract the value of the debts you owed on the day that you separated

• Money owing on credit cards, the amount left to pay on your house and a car loan are all examples of debts.
• List them at their value on the day of separation.

Step 3: Subtract the value of property that the law allows you to keep for yourself

• This property includes gifts and inheritances received from someone other than your spouse during your marriage, money received from an insurance company because someone died, and money you got or have a right to get as a result of a personal injury.

Step 4: Subtract the value of property that you brought into your marriage less the value of debts

• Add up the value of all the property that you owned when you married.
• Do not include your family home, even if you owned it on the date of your marriage.
• Subtract all the debts you had when you married.

The final step will tell you if one of you owes the other any money.

Step 5: Find out if a payment is owing

• Compare the value of your share of the family property to the value of your spouse’s share.
• Subtract the smaller amount from the larger amount.
• Divide the difference by 2. This is the amount that the spouse with the larger share must pay to the spouse with the smaller share.
• This payment is called an equalizing payment

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Old 06-30-2010, 09:29 PM
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If I am reading this properly....

Spouse # 1 borrowed $30,000.00 from his/her parents prior to the marriage.

The loan was not legally documented, and is essentially untraceable, (which is reasonable considering the source of the loan).

The marriage lasted 2 years and is now over.

Seems like a no-brainer to me... Spouse #2 is in no way liable for that debt, and Spouse #1 can't even prove that the debt exists. Even sworn testimony from mom and dad wont hold up in court.

Now lets say that the parties jointly borrowed the cash while the were dating or engaged, and shared the funds to pay for their wedding, or education etc., then both parties should repay the debt.
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Old 06-30-2010, 10:50 PM
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You split assets accumulated during marriage, minus the debt accumulated during marriage.

Assets and debt from before the marriage do not apply to the equalization.

If the loan was "hidden" this doesn't change anything at all, unless the party decides to try fraud and claim that the loan was made during the marriage. It could then be applied against any assets built up during the marriage. The other spouse would have at least a general awareness and would dispute this and it would turn into quite the battle. This is a lot of money for a short marriage.

If there are no assets left and there is a net debt, the debt is not split. Each person would keep their own net debt. The Family Law Act only specifies splitting of property, it does not call for splitting of debt. Debt is not split, but debt will be subtracted from assets, because if you borrow money you are essentially borrowing to pay for the asset you build up. This is probably as clear as mud, but just simply, if all there is left is debt, then the debt is not split.
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Old 07-01-2010, 08:21 AM
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@ Blinkandgone

That post/article you quote is where the confusion came from. In another post from Pheonix99, he reads that article as indicating that the debt before marriage does get split. However, I believe he is misinterpreting what is written in the highlighted section.
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Old 07-01-2010, 08:25 AM
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Regarding the second point which may clarify things to others.

I believe Partner1 had a student line of credit that the father paid for and absorbed into his mortgage. So there was a record with a financial institution but then it was paid off (by the parent). There may be a case that this may not be considered a 'gift.' However, Partner1 pays monthly payments to the parent. Thus, might that hold up in court (of course, if it were during the marriage, not before as we have discovered in this thread)??? I dont know.
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Old 07-01-2010, 09:43 AM
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Your description is as clear as mud.

The student loan was before marriage? If so, it is none of anyone's concern for the divorce. If the parent paid off the loan, be serious here: Not all, but many parents are willing to gift a child to pay off their student loan once they complete school. This is hardly unusual. You have no case. If you bring issues to the table that can't be resolved without a forensic accountant, all you are doing is dragging out the process and adding tens of thousands of dollars to your bill, and you will get nothing out of it.

If you think this or any issue is relevent to the case, then you have to articulate why in a simple, clear, concise manner. The courts are interested in facts and logical conclusions and the application of the Family law act.

As far as your question about the highlighted section, you are questioning a simplified, generalized explanation from a pamphlet. Your answer is in the Family Law Act. The couple will equalize net assets accumulated during marriage. Is the loan an asset? No. Is the loan from during the marriage? No. What is your point then?
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Old 07-01-2010, 11:13 AM
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Main Point/Conclusion
-after divorce, any debt that was accumulated before marriage is solely the responsibility of the party whom accumulated it

Point 2
- irrelevant because of main point. If the loan was accumulated during the marriage and transferred to the parent, this may be another issue, but would require its own thread for clarification.

Case closed. Thank you all for responding.
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Old 07-01-2010, 11:35 AM
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If the loan was accumulated during the marriage, it is still irrelevent if the loan is paid off. It doesn't matter how it was paid off. This is no different than if you received money and then spent it in restaurants. No assets remains, there is nothing to split.

Only the net on validation (separation) date is relevent. If the parent paid off the loan, there is no net amount of money in the person's hands.

Let's say the loan taken out, even if during the marriage was 30k. The parent gave 30k. There is no money left over. What is there to split?

Let's say the parent gave 50k. 30k went to pay off the loan. 20k remains. The argument would be that this remaining 20k is:
a) a loan, and this can be applied as a liability to the equalization, negating the 20k asset sitting in a savings account
b) a gift, in which case it cannot be included in equalization
c) payment for some unknown service rendered, with no records of any transaction and no direct knowledge or involvement of the other spouse; this would be completely unprovable and would be dismissed unless there was some kind of supporting evidence.
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