Equalization Payout

[Theorygirl]

I need some advice please. My boyfriend thinks his lawyer is not working in his favour. What he is telling him just doesn’t seem fair. His wife moved out almost two years ago, leaving him with their three children, the house and all the debt. She has not paid a cent towards the children, house, debt etc. since she left. Since proceedings have started (a whole bunch of lawyer letters back and forth-she doesn’t care about cost, she’s getting legal aid) he has found out that somehow she has become a recipient of ODSP. She is quite capable of working (she even told him she was working for cash cleaning hotel rooms). She had several jobs when they were married. She claims she has been diagnosed with bi-polar disorder. Most people with bi-polar disorder take medication and are quite capable of working, are they not? Somehow she has manipulated the system and now all of a sudden she can’t work. Anyway, there is not a lot of equity in the house, about $13,000.00. He almost lost the house because he had to take a lower paying job and less hours because he needed to be home to get the two youngest girls on the bus in the morning. He has assumed all the joint debt, about $15,000 to protect his interest in the house. She told the creditors to take the house because she wasn’t paying it but NOW since she’s been seeing a lawyer, she is expecting to get an equalization payout for half of the $13,000. PLUS, since she is a “public charge” she is going after him for spousal support because apparently when you are on social assistance you must make every effort to get support. His lawyer is telling him also that she probably won’t have to pay child support because “she doesn’t have any money”….”you can’t get blood from a stone”.. Does this sound fair to you? His lawyer has suggested that he offer her a larger “payout” (approx $10,000) for the house and try calling it even (????). Should he be looking for a new lawyer? Or does this seem right?

 

[HappyMomma]

She would only be entitled to any equity in the house at the time of separation. Which means if the equity was 20K back then and your bf has since taken out a second mortgage - she'd be entitled to the 10K. However, she is also responsible for half the debt at the time of separation, which, as you pointed out, she has not paid.

Start stock piling documentation on what the house was worth then, the equity, and the amount of debt at that time. Google F13 financial forms online and fill them out to give yourself an idea of what the equalization payment should be. And good luck!!

 

[HammerDad]

No it doesn't seem right, and yes, she should be paying c/s. Your lawyer is right about getting blood from a stone, but the reality is that the children have the right to be supported by both parents. And between ODSP and (possibly) spousal support, she has an income that you can calculate with the guidelines.

Equalization should happen as at the date of separation. So you b/f should determine the amount of debt outstanding at that time, the amount the house was worth at that time and the amount of assets each party held at that time (ie. value of cars, RRSP's accomulated throughout the marriage etc). Then the debt and assets should be distributed equally to each party.

He may have to pay some spousal support to his ex. As many will tell you the rule of thumb (which is just a guideline, not set is stone) is .5 to 1 year of SS per year of marriage.

If she is on ODSP and has a doctors note say she cannot work, chances of imputing her income to a minimum full time minimum wage may not be likely, but it is still something that I would give a shot.

If he does have to pay SS, I would ensure that he pays the full SS, not SS minus any CS owed by her to him. Why? SS is tax deductable and CS is tax free. So ensure that full cheques go both ways.

His lawyer sounds like they figure settling for an amount like $10k will be cheaper then a protracted court battle, especially considering she is on legal aid. And the lawyer is probably right. But that is also so long as the lawyer works to ensure your b/f's interests are maintained, like custody, child support, a proper length of SS (if any) and that equalization is properly distributed.

 

[Mess]

Hi,
I would say fire the lawyer yesteday. it's not that the lawyer isn't for your best interests, they just are not very good, the advice is flimsey and at best they aren't explaining the options.

Legal aid won't cover property claims only custody and support. She may be getting some small advice from the aid lawyer but she cannot get legal aid to take you to court for property.

People with bi-polar may need to try a variety of meds and combos to stablize. This can take years because they have to be off med a for weeks or months before they can try med b. Her mental illness is not for you to judge.

Her income level on odsp is found on support tables, she should pay a token amount at least. You shouldn't word an agreement or order that she pays nothing going forward, you word it tied to income and update it yearly.

You are over thinking the house equuity and debt. What was the debt in each person's name at time of separation? Do a proper financial disclosure and equalization calculation and at least start from there

Lump sum instead of SS is a bad idea it doesn't get odsp off your back. I would say you are best off with a judge's decion here you would likely pay little or nothing but it carries full weght with odsp. Cut some deal and agree to a lump sum and odsp still goes after you next year..

 

[NBDad]

Lump Sum spousal is a hideous idea anyway. You can't claim a lump sum on income taxes, where a monthly payout you CAN.

 

[Theorygirl]

Even though she hasn't been living in the house, should she not be responsible for part of the mortgage payments, bills etc. She walks away, pays nothing for two years and then is entitled to an equalization payout? Full financial disclosure has been done. The house was appraised as of valuation date etc....the debt he is paying was all taken off the value of the house. Value of House-Mortgage and Debt = $13000. She gets half. He's paid out twice that in bills and mortgage over the last two years.