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Wife Runs Up Post-Separation Debts – Should Husband Have to Pay?

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Wife Runs Up Post-Separation Debts – Should Husband Have to Pay?

In the recent case of Panchalingam v. Pathmalingam, the Ontario court tackled the question of whether a separated husband should effectively be forced to share the burden of the mother’s post-separation financial irresponsibility.

The couple had been married about 20 years when they separated. The wife retained possession of the home where she lived with the three children of the marriage; the husband was given specified access to the children and was paying support pursuant to a court order.

However, the wife allowed her finances to get out of control: she ran up a line of credit that had been secured against the home, defaulted on the mortgage payments, and also owed money to Legal Aid Ontario, which placed a lien on the home for almost $20,000.

All of this took place without the husband knowing. He only learned of the mortgage default when he arrived at the home after work one day, and found a letter on his door from the bank, indicating that he would be evicted and the home sold unless the debt was cleared up. He found out about the lien only later.

The husband then took emergency steps to prevent the family home from being lost, arranged for refinancing, and settled with Legal Aid Ontario for most of the outstanding debt.

When the parties returned to court to address their equalization of net family property, the husband asked for an unequal division to account for the fact that – in light of the wife’s post-separation mismanagement – it would be unfair to burden him with half the costs of her self-imposed debt.

The court weighed the factors in favour and against allowing the money to come equally from equalization and primarily the family home.

On the one hand, the wife had been in desperate circumstances since separation, working at Tim Horton’s and relying on the generosity of her friends and church to meet her basic needs. She had been borrowing money to pay for necessities, and enlisted the help of Legal Aid Ontario in order to settle the custody issues stemming from the breakdown of her marriage to the husband.

On the other hand, the wife had incurred these debts on her own, and had failed to take any steps to deal with them. She had become apathetic and had allowed matter to get so out of control that the security of the home in which the children lived was in real jeopardy. More troubling was that failed to take any responsibility for the situation even when circumstances were clearly dire, and it was only the husband’s eleventh-hour steps to refinance which prevented the family home being lost. The court concluded:

“In my view, the Respondent’s indifference and unresponsiveness to the servicing of her debts, leading to the situation where liens were imposed and the home was at risk, constitute reckless depletion of her net family property.”

As a result, the court found that an equal division of family property would be unconscionable in the circumstances, and reduced the wife’s entitlement accordingly.

For the full text of the decision, see:

Panchalingam v. Pathmalingam, 2013 ONSC 4284 (CanLII)   http://canlii.ca/t/fzcp2

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.