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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 07-29-2012, 05:38 AM
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Default Net Equalization

I agreed to sell the house to my ex-spouse, but we did not deal with the rest of the financials yet.

To buy out my share of the house out my ex is to give me $ 40K (which includes paying off of one joint debt of $5K). The house was sold "as is", excluding the contents of the house included i.e. washer, dryer etc, building supplies for renovation etc that was purchased.

His Pension Plan - will be divided at source and my half will be put into a locked RRSP. (because he said he could not afford to buy me out)

We have more debts than assets (more on my side because during our marriage he could not get credit and it was always in my name).

How does that work in the net equalization now that the house is taken out of the equation (or is it considered still as part of it?)
Financial picture below:-
1.I have about 50K in debt (under my name for loans, cc etc).
2.We have joint debt of $ 14K
3. He owes me over $5K for Section 7 Expenses - Is this treated separately from Net Equalization?
4. RESP - $4K is owed (which is to be paid proportionate to our income) ..Q : Is this considered part of net equalization also, or no ?
5. Buidling supplies for the renovation to the house that he never completed or did was not included in the sale of the house - this is part of the assets. He has it at the house.
6. He has other assets on his side that amount to at least $30K. (besides his pension).
7. I have a lein on the house by Legal Aid that is for $20K that I understand is to be paid off first (which only leaves me about $15K)

Because the debts are mostly in my name and not his, how does this impact the equalization process. Is he to pay me for his half of the debt which was all incurred during our marriage ? And because we have more debt than assets how does that impact the whole thing.

Any help to make sense of this would be appreciated. I don't want to go bankrupt. My ex spouses parting words were "I'll bankrupt you again" and I don't want to go down that route again.

Thanks
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Old 07-29-2012, 08:19 AM
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It does not matter in who's name is debt, all debts a common.

If you are correct about saying that you have more debts than assets, you will end up with some debts after the equalization payments.

Basically you need to add up all debts and subtract from the sum of all assets.
I have some question - you apparently not divorced yet, why do you already have S. 7 expenses?
Why is RESP is listed as debt?
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Old 07-29-2012, 10:14 AM
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Quote:
Originally Posted by randomjohndoe View Post
It does not matter in who's name is debt, all debts a common.
No they are not common. That statement too easy to misinterpret.

Debts in one party's name stay in that party's name. They are responsible for their own debt, to the debtor. If they default, the bank, credit agency, etc. will not go after the other spouse. Saying that debts "are common" is completely misleading.

If the debts exceed the assets, then the remaining debt is not split (in Ontario.)

Section 7 expenses can already exist if they are separated but not yet divorced. His share would be added to the total he owes you in equalization.

The RESP I think you mean this is a future liability, to be paid as you go? Or do you have a separate loan taken out for this? This is unclear but as far as future payments go, you have to work that out for yourselves how to split it, it is not really a section 7. It would be a good idea to discuss how the child's post-sec costs will be split and how the RESP fits into that and have it built into the separation agreement.

You need to include the value of appliances, the building materials, furniture that stays with the house on his side (if he is keeping them.) This will be several thousand dollars, it shouldn't be ignored.

Do you have vehicles? They need to be included as assets. You can't cut them in half, so if you each take one, determine the difference in value and this gets added to that person's balance sheet.

Sorry, every time I look through your post, the numbers are all over the place.

What is the house worth? 80K after the mortgage? Don't mix up the joint debt with that figure, just total the assets for now.

Is the total joint debt $14k or $19k?

Do you own any vehicles? The appliances, furniture, building materials, etc. are staying with the house. What is their value?

You say he doesn't have much debt. How much debt does he have?

How much is the pension worth?
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Old 07-29-2012, 10:47 AM
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I"m not entirely sure I agree. If you both used your credit throughout the marriage I would want his portion of the debt. If only your name was on the credit cards then Mess is correct that you will have to pay for it in the end. That doesn't mean you aren't entitled to an equal amount from him from house sale. If he doesn't agree with this then I'd simply go for his pension. Good bargaining chip.

Equalization is supposed to be the objective. No one person is supposed to be left with more debt/asset than the other.
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Old 07-29-2012, 12:00 PM
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Arabian, I get what you are saying in terms of what you think is fair and negotiable, but in terms of Family Law, it is just mathematics. It is a formula, it is non-judgmental, you add it up on the balance sheet and it is done.
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Old 07-29-2012, 12:48 PM
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Yes but in my case the judge stated the intent of the equalization process and she did make many adjustments so it went far beyond mathematics. I guess it depends how you get your divorce done. We did a binding JDR. Lawyers, my ex, myself and judge worked collaboratively to make things as fair as possible. Guidelines are just that. Guidelines.
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Old 07-29-2012, 01:50 PM
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In Ontario, equalization has nothing to do with guidelines, it based on the Family Law Act. I believe you are in Alberta? Also if you had JDR then it was not the same as a court decision. Everyone is free to negotiate an alternative solution, or agree to an arbitrated solution.
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Old 07-30-2012, 10:17 AM
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Quote:
It is a formula, it is non-judgmental, you add it up on the balance sheet and it is done.
Essentially true. Certain exceptions exist in Ontario based on disproportionate debt being taken on or unconscionable results.

Quote:
Is he to pay me for his half of the debt which was all incurred during our marriage ? And because we have more debt than assets how does that impact the whole thing.
Work out your respective net family properties. Given you have all of the debt I will assume his NFP is greater. He will then have to pay you half of the difference.

However, if you are in a net debt situation, the situation can become more complicated. Why was the debt incurred? How much debt is there? Have you included the value of his pension in the division of property?

If you qualify, I strongly suggest seeking a legal aid certificate so that you can retain a lawyer to help explore whether your situation falls into unconscionable grounds or whether spousal support can help mitigate the potential financial loss.
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Old 07-30-2012, 12:47 PM
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Exactly. My understanding. Is its just numbers. It does.t matter what side of balance sheet its on... Will all come out the same... All the debt is in your name, if u split in half. Then half the assets equal out. If u keep all the debt on your side.... He will have more asset thus pay u the difference....therefore essentially paying half the debt.
I hate family law. Licence to steal. Lol
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Old 07-30-2012, 01:15 PM
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Quote:
Originally Posted by phatkid77 View Post
Exactly. My understanding. Is its just numbers. It does.t matter what side of balance sheet its on... Will all come out the same... All the debt is in your name, if u split in half. Then half the assets equal out. If u keep all the debt on your side.... He will have more asset thus pay u the difference....therefore essentially paying half the debt.
I hate family law. Licence to steal. Lol
As other explained, it is working slightly differently. If I hold 200K of debt and you hold 100K of assets, you pay me 50K equalization, because if my net worth is <0, it is counted as 0. So you end up with +50K, me with -150K

Note to self: make sure next wife holds a lot of debt in her name
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