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Debt splitting based on income??

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  • Debt splitting based on income??

    Maybe this is too vague of a question, but if a couple splits up and they have a net worth of zero, or possibly even negative, yet he was a rig manager making $1200 per day and she was a stay at home housewife/caregiver. Will the courts make her take half the debt accumulated during the marriage?

    Does it change if she had no access to money or made no financial decisions during the marriage?

  • #2
    What normally happens if all the assets acquired during marriage are added up and all the liabilities (debts included) subtracted from that. Anything left is split.

    If one person decides to keep the matrimonial home, the calculation is different.

    To answer your specific question though, if the debts were acquired during marriage then yes, the wife gets them too.

    Comment


    • #3
      A) If Assets are more than Debts:


      - Debts are split equally.


      B) If Assets are less than Debts:


      - The person who has their name on the debt gets screwed.




      Explanation


      A) If Assets are more than debts, then it is a straightforward equalization. Income is irrelevant.


      B) If Assets are less than debts, then not all of the debts can be paid off. Some debts will remain. The holders of that debt are not parties to the divorce and cannot be forced to "divide" up the debt in any way. If both names are on the debt, then both people are screwed. Income might be slightly relevant if a judge has to decide which debts will be paid off. However, the judge cannot transfer debt from one person to another. Likely one person is getting screwed.

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      • #4
        Like others have said, she would be responsible for her debt and joint debt.
        If he's making $1200/day though, she should get more than enough spousal support to handle her part of the debt.

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        • #5
          So far she is getting $1500/month for 2 kids.

          Obviously she will have to go for max spousal and make it a lump sum.

          Comment


          • #6
            You may also want to speak to a lawyer about that spousal and her going back to work at some point.

            Comment


            • #7
              Originally posted by rockscan View Post
              You may also want to speak to a lawyer about that spousal and her going back to work at some point.
              For sure. The youngest is 3 and she has them full time but she will definitely have to work. Currently she does child care out of her home.

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              • #8
                I just realized something....the debts are held in the corporation and she doesn't own that corporation or have her name on it.


                Does that change anything??

                The lawyer has taken weeks to get back to her since she had to use legal aid.....thanks for the input!

                Comment


                • #9
                  I don't know anything about corporations, but normally they would both be responsible for their own debt and 50% of joint debt.

                  I'm not sure where they are in the process or how long they were together, but it's almost certain she will get spousal spousal on top of the $1500 child support. While she may most likely ask for the high end amount, I don't see why it should be lump sum.

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                  • #10
                    She wants lump sum so she know she actually gets it. Rather than receive verbal abuse about it every month.

                    The corporation has always belonged to only him, so I don't really see why it needs to even be split up. He can take his failing corporation and try and turn it around.....lol

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                    • #11
                      How your friend decides to calculate his income tax is irrelevant to things (corporation, partnership, sole proprietorship). Income - reasonable business operating expenses = $$$$ is what it is all about. If assets are retained in the corporation then that is for accounting purposes. Spouse is entitled to 50% of assets in the company, particularly if he is sole owner of the corporation. Mistake people commonly make is thinking that they can reduce the amount of money they have to pay the ex based on allowable income tax deductions. Doesn't work that way. Your friend's company financial records (income statements, bank statements, GST/HST filings, payroll records, etc) may come into play.

                      Comment


                      • #12
                        Originally posted by arabian View Post
                        How your friend decides to calculate his income tax is irrelevant to things (corporation, partnership, sole proprietorship). Income - reasonable business operating expenses = $$$$ is what it is all about. If assets are retained in the corporation then that is for accounting purposes. Spouse is entitled to 50% of assets in the company, particularly if he is sole owner of the corporation. Mistake people commonly make is thinking that they can reduce the amount of money they have to pay the ex based on allowable income tax deductions. Doesn't work that way. Your friend's company financial records (income statements, bank statements, GST/HST filings, payroll records, etc) may come into play.
                        What happens though if the company really does owe more money than it has assets?

                        Does she have to take half that debt even though he was the sole owner?



                        He currently is paying $4300 per month on his mortgage which had an original amount of $815000.
                        I can't see any judge loading her up with debt like how her ex is threatening to make happen....

                        Comment


                        • #13
                          He is capable of making $300k per year but is conveniently under employed as of Jan 1 and will be making $20/hour and of course wants to lower his support payments immediately

                          Comment


                          • #14
                            Originally posted by Acadia71 View Post
                            She wants lump sum so she know she actually gets it. Rather than receive verbal abuse about it every month.
                            She can just sign up with a maintenance enforcement agency and never face any verbal abuse at all. Trying to get a lump sum is a losing proposition unless it is a relatively small amount of money.

                            The corporation has always belonged to only him, so I don't really see why it needs to even be split up. He can take his failing corporation and try and turn it around.....lol
                            He is capable of making $300k per year but is conveniently under employed as of Jan 1 and will be making $20/hour and of course wants to lower his support payments immediately
                            Try to keep your story straight within a given thread. It helps with your credibility.

                            Comment


                            • #15
                              Originally posted by Janus View Post
                              She can just sign up with a maintenance enforcement agency and never face any verbal abuse at all. Trying to get a lump sum is a losing proposition unless it is a relatively small amount of money.





                              Try to keep your story straight within a given thread. It helps with your credibility.
                              He is deliberately switching jobs in January, from $1200/day to $20/hour.

                              If you make $300k and spend $400k you’re not going to be successful......sorry for the confusion.

                              Comment

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