Can One Spouse Foist Debt on the Other?
As we have written before , Ontario law has special rules about how a matrimonial home can be dealt with by spouses during marriage. But what about other assets? And who is ultimately responsible for any debts incurred while married?
Let’s tackle the easiest one first: Assets. From a technical legal perspective, each spouse is generally free to deal with his or her own assets during marriage. (This of course leaves aside the practical reality that in a successful marriage both spouses may have informal input on how assets are dealt with, regardless of true ownership).
The responsibility for debts, on the other hand, is a little more complex. Here are some points to know:
• Getting married does not automatically make you responsible for the existing, pre-marriage debts of your new spouse.
• During marriage, each spouse is only responsible for those (non-joint) debts that are incurred in his or her own name; the other spouse is not responsible unless they have guaranteed or co-signed the loan in writing. (And the Family Law Act provides for the deduction of these debts when the parties separate, for the purposes of calculating the Net Family Property, although exceptions are made if the debts are incurred recklessly or in bad faith.)
• Death does not change this: If one spouse dies leaving personal debts, the other is not personally responsible to repay them. However, creditors are entitled to be paid out of the deceased spouse’s estate prior to having those assets distributed to beneficiaries, including the surviving spouse.
• On the other hand, debts that are incurred jointly during marriage (e.g. a joint loan agreement, or where one spouse co-signs for the other), become an obligation that is shared by both spouses.
• Note that for such jointly-incurred debt, a separation agreement is ineffective to change or eliminate the respective obligations of the spouses to lender. Rather, any change as to who is responsible for the joint debt has to be re-negotiated with the original lender and reduced to writing in a new agreement.
With that said, credit card debts are in their own category: To determine which spouse is responsible for credit card debts, it is necessary to review what the written agreement with the credit-providing bank or organization says. Specifically:
• The agreement may provide that one spouse is the primary cardholder, but that the other spouse is also given access/authority to incur charges (usually through a second card). These kinds of agreements usually stipulate that the spouse who is the primary cardholder remains liable for all charges.
• On the other hand, if both spouses sign the cardholder agreement and commit to being jointly responsible, then they both remain liable for any charges.
• Note that in either case, this liability arises not through the fact of marriage, but because the written agreement with the credit-providing facility says so.
Do you have further questions on how debts during marriage are treated?
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