Division of Property and Responsibility for Debt in British Columbia

When couples separate, dividing property and debt can be one of the most complex and emotional parts of the process. In British Columbia, these matters are governed primarily by the Family Law Act (FLA), not the Divorce Act. Understanding how property and debt are defined, divided, and possibly excluded is essential for anyone navigating a separation.

Who Does the FLA Apply To?

The FLA applies to both married spouses and unmarried partners who have lived together in a marriage-like relationship for at least two years. This means that even if you were never legally married, the FLAmay still affect how property and debt are divided.

Key Terms in Property and Debt Division

Three important concepts under the FLA are:

  • Family Property
  • Excluded Property
  • Family Debt

Family Property

On separation, each spouse generally has an undivided one-half interest in all family property. Family property is broadly defined and includes:

  1. Property owned by either spouse at the time of separation.
  2. Property acquired after separation if it came from family property or its sale.

The FLA also provides examples of family property, but the list is not exhaustive, meaning other property can also qualify.

Excluded Property

Not all property is considered family property. Section 85 of the FLA identifies excluded property, which is generally not subject to division. Excluded property can include:

  • Property acquired before the relationship began.
  • Gifts or inheritances received from third parties.
  • Certain insurance payouts, settlements, or damage awards.
  • Property held in trusts under specific conditions.

However, there’s an important caveat: growth in the value of excluded property during the relationship can be treated as family property and divided between the spouses. The spouse claiming a property exclusion bears the burden of proof, using the civil standard of balance of probabilities.

Family Debt

Debt incurred during the relationship (or after separation if it’s used to maintain family property) is considered family debt. Both spouses are generally equally responsible, although this does not affect the rights of creditors.

It’s important to note that ownership or registration does not determine responsibility; what matters is how the FLA defines the property or debt.

Unequal Division of Property and Debt

While equal division is the default rule, the court or the parties themselves can agree to an unequal division. The court will only order unequal distribution if equal division would be significantly unfair, considering factors such as:

  • The length of the relationship
  • Any agreements between the spouses
  • Contributions to each other’s careers
  • Whether debt was incurred in the normal course of the relationship

This ensures that property and debt division is fair and tailored to the circumstances of the couple.

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