Dealing With Debt During Divorce in Canada 2025

Updated March 2025 · 11 min read · bremo.io

Divorce is financially complex at the best of times. When significant debt is involved, the stakes rise further. Unlike assets, debt doesn't simply divide when a marriage ends — creditors are not bound by separation agreements, and joint debt remains jointly owed regardless of what you've agreed to between yourselves. This guide covers how debt is handled in Canadian divorce and what to do if you're facing debt problems at the same time as separation.

How Debt Is Divided in Canada

Canada is a common-law country without a single national rule on matrimonial debt division — family property law is entirely provincial. However, most provinces follow one of two approaches:

Equalization of Net Family Property (Ontario and Similar Provinces)

In Ontario, at separation each spouse calculates their "net family property" (assets minus debts acquired during the marriage). The spouse with the higher NFP pays half the difference to the other. Debts accumulated during the marriage are factored into this calculation, reducing each spouse's NFP. The goal is for both spouses to end up with equal value accumulated during the marriage.

Division of Marital Property (BC, Alberta, and Others)

In BC (Family Law Act), "family debt" — all debt incurred by either spouse during the relationship — is shared equally regardless of whose name it's in. Debt brought into the marriage is generally that person's responsibility. The court has discretion to vary equal division if equal division would be significantly unfair.

Quebec (Civil Code) has its own "family patrimony" rules. Always consult a family law lawyer for province-specific advice.

The Joint Debt Problem

This is where divorce and debt become genuinely dangerous. When you and your spouse have joint debt:

• Joint credit cards: both parties are equally liable for the full balance
• Joint lines of credit: both parties are equally liable
• Co-signed loans: the co-signer is equally liable if the primary borrower defaults
• Joint mortgage: both are liable; the lender doesn't care about your separation agreement

If your separation agreement says your spouse takes responsibility for the joint Visa, and they then stop paying — the credit card company will pursue you, report to your credit bureau, and potentially sue you. Your only remedy is to take legal action against your ex-spouse through family court.

Practical Steps for Joint Debt During Separation

1. Immediately Close or Separate Joint Accounts

As soon as separation becomes certain, contact joint creditors and request to remove one person from accounts, or pay off and close them from divorce settlement proceeds. Many creditors will only allow removal if the account is paid in full or the remaining party re-qualifies on their own.

2. Pay Down Joint Debt First

If there are shared assets (home equity, RRSPs, investments) being divided, consider using division proceeds to eliminate joint debt completely — this removes the risk that one party's future non-payment damages the other's credit.

3. Refinance Into One Name

For the matrimonial home, if one spouse is keeping it, have them refinance the mortgage entirely into their own name — removing the other spouse from the mortgage and the debt. The spouse who qualifies on their own takes over the debt; the other is released.

4. Document Everything

Keep records of all debt payments you make on joint accounts, especially if your separation agreement allocates that debt to your spouse. You may need this documentation to seek reimbursement through family court later.

What If Your Ex-Spouse Files Bankruptcy or a Consumer Proposal?

If your ex-spouse files insolvency on a joint debt, the creditor cannot collect from the bankrupt spouse — but they can and will pursue you for the entire balance. Your ex-spouse's insolvency does not protect you as a co-borrower or co-signer.

You can include joint debts in your own consumer proposal or bankruptcy if you are also insolvent. Spouses can file joint proposals if they share debts — this can be more efficient than filing separately.

When Insolvency Makes Sense During Divorce

Sometimes people going through divorce find themselves with significant joint and personal debt that cannot be managed on a single income. Formal insolvency options — consumer proposal or bankruptcy — can provide:

• A legal framework for eliminating unsecured debt
• An immediate stay of proceedings stopping creditor actions during a chaotic time
• A clear financial reset that makes the post-divorce financial picture manageable

If both spouses have joint debt and both have income challenges, a joint consumer proposal may address shared debt efficiently. If only one spouse is insolvent, an individual proposal or bankruptcy addresses their personal debt load.

Debt That Survives Insolvency in Divorce Contexts

Some divorce-related debts are not dischargeable in bankruptcy:

• Child support: Cannot be discharged in bankruptcy or a consumer proposal. Continues regardless of insolvency filing.
• Alimony/spousal support: Cannot be discharged in bankruptcy.
• Property settlement debts ordered by a family court: If a court order requires you to pay your ex a specific sum as part of property division, this may survive bankruptcy (though the rules are complex and case-specific — get legal advice).

Protecting Your Credit Through a Divorce

To minimize credit damage during separation and divorce:

• Monitor your credit report closely — watch for missed payments on joint accounts
• Make minimum payments on joint accounts even if you expect your ex to pay — protect your credit first
• Work to convert all joint accounts to individual accounts as quickly as possible
• Open accounts in your own name to start establishing individual credit history
• Consider consulting a financial advisor who specializes in divorce financial planning