By Sean Schaefer
Ending a relationship is never easy. Beyond the emotional strain, most couples face the practical question of how to separate their finances. While many people focus on who gets the home, vehicles or savings, an equally important issue often receives less attention: the division of debt.
Debt can be one of the most complicated aspects of a separation. Loans taken out years earlier, credit card balances, tax arrears, lines of credit and business obligations can follow you into your new life unless there is a clear plan. In Alberta, the law treats debts much like property — they must be considered, valued and allocated fairly. Understanding how this works can prevent uncertainty and reduce the risk of future financial conflict.
How Alberta Law Treats Debt at Separation
In Alberta, the division of property and debt is governed by the Family Property Act (formerly the Matrimonial Property Act). The Act applies to married couples and adult interdependent partners (AIPs) whose relationship meets the statutory criteria. The legislation recognizes that partners often share financial responsibilities during their relationship, even if only one person’s name appears on the paperwork.
Key principle: Debt acquired during the relationship is generally shared
Under s.7 of the Family Property Act, assets and debts acquired during the relationship are considered family property and are presumed to be divided equally, unless an unequal division would be fairer.
This presumption applies regardless of legal title. If a credit card was in one spouse’s name but was used for family purposes, it will typically be treated as a shared obligation.
Debt division is intended to reflect the financial partnership that existed during the relationship.
Types of Debt Commonly Addressed in Divorce
Many forms of debt come into play during separation:
- Credit card balances
- Lines of credit
- Personal loans
- Joint loans or co-signed debts
- Tax debts and CRA arrears
- Business-related debts (if tied to family benefit)
- Mortgages and home equity lines of credit (HELOCs)
Each type requires careful analysis to determine when it was incurred, who benefited from it, and whether it should be shared.
When Is a Debt Shared?
Not all debt is automatically considered family property. Courts examine the underlying purpose of the debt.
A debt is usually shared when it:
- Was incurred during the relationship, and
- Provided some benefit to the family unit, even indirectly.
Examples include debt used to pay household bills, buy groceries, renovate the home, or support one spouse’s education that increased earning potential.
A debt may be excluded if it:
- Was incurred before the relationship began;
- Benefited only one spouse personally;
- Was related to reckless financial behaviour without the other spouse’s knowledge;
- Was incurred after separation without valid connection to the family.
The court has discretion to make an unequal division when fairness requires it — especially if one spouse took on debt secretly or irresponsibly.
The Role of “Date of Separation”
Debts incurred after separation are not automatically excluded. Alberta courts look at the purpose, timing and fairness.
For example:
- If you use a line of credit to pay the mortgage after separation because both spouses share the home, the debt may still be shared.
- If you take on new credit card debt for personal spending unrelated to the family, it may be allocated solely to you.
This makes financial disclosure essential — both spouses must provide complete, honest information so debt can be assessed properly.
What About Joint Debt?
Joint debts — such as a co-signed line of credit or joint credit card — deserve special attention.
Legally, lenders can pursue either borrower
Even if a separation agreement assigns responsibility to one spouse, the lender is not bound by that agreement. If your former partner defaults, the bank may turn to you for repayment.
This is why many separation agreements require that:
- Joint debts be paid off, or
- Joint accounts be closed, or
- One spouse refinance the debt solely in their name.
Where refinancing is not possible, a separation agreement should include detailed repayment terms and consequences if the responsible party fails to comply.
Mortgage and Home-Related Debts
Many Alberta couples hold most of their debt in the family home. When separating, questions often arise about:
- Who will stay in the home?
- Who will pay the mortgage?
- Will the mortgage be refinanced?
- Should the home be sold?
If one spouse remains in the home, they often take on responsibility for the mortgage and HELOC, typically through refinancing. If refinancing is not possible, the parties may agree to temporarily share payments.
The equity in the home — the value minus the debt — is treated as family property and must be divided fairly.
For further reading: Selling the family home after your relationship ends.
Student Loans and Educational Debt
Student loans can be complicated. Courts consider whether the education benefited:
- The spouse who studied;
- The family as a whole; or
- The long-term earning capacity of the household.
If the spouse’s education increased the family income or reduced childcare costs (e.g., by enabling better employment), the debt may be shared. If the education was pursued for personal reasons with limited family benefit, the debt may be assigned to the borrower alone.
Business Debt
For spouses who own a business, debt may be intertwined with personal finances. The court examines:
- Whether the debt produced income that supported the family
- Whether the business is jointly owned
- Whether one spouse took on risk without the other’s knowledge
- How the debt and assets relate to each other
Business valuations may be required — particularly when debts reduce the value of the business as a family asset.
See: Business valuations in divorce.
Unequal Division: When Fairness Requires a Different Approach
While the default rule is equal division, Alberta courts may order unequal sharing if equal division would be unfair. This can happen when:
- One spouse racked up significant debt secretly
- The debt was used for harmful behaviour (gambling, substance abuse, or reckless spending)
- A spouse dissipated assets intentionally
- One partner carried disproportionate financial risk for the family
Alberta’s Family Property Act grants judges broad discretion to reach a fair result based on the circumstances.
Financial Disclosure: The Foundation of Fair Division
Every divorce or separation requires full financial disclosure. Both spouses must provide:
- Bank statements
- Credit card statements
- Loan documentation
- CRA assessments
- Mortgage and HELOC records
- Business financials (where applicable)
Without proper disclosure, debt division becomes guesswork — and courts will not finalize a property division based on incomplete information.
For more context, see: Courts demand full financial disclosure in family law cases.
Can a Separation Agreement Divide Debt?
Yes — and many couples choose this route. A negotiated separation agreement can:
- Assign specific debts to each spouse
- Outline repayment obligations
- Require joint debts to be paid or refinanced
- Set deadlines for closing joint accounts
- Include dispute-resolution methods if issues arise later
Courts generally respect these agreements when they are negotiated fairly and with full disclosure.
For more detail: What is a separation agreement and why should you have one?
Why You Should Seek Legal Advice
Debt division can shape your financial future for years. Without clear guidance, you risk taking on more than your fair share or being held responsible for debt you didn’t incur.
A family lawyer can:
- Clarify your rights under the Family Property Act
- Determine which debts should be shared
- Protect you from future liability on joint debt
- Ensure the separation agreement is enforceable
- Negotiate repayment terms that reflect your financial situation
Given the long-term consequences, obtaining legal advice is essential.
How Demas Schaefer Family Lawyers Can Help
At Demas Schaefer Family Lawyers, we help Albertans navigate the complexities of property and debt division during separation and divorce. Our team works to ensure that financial obligations are identified, valued and divided fairly, whether through negotiation, mediation, collaborative law or litigation.
We offer practical guidance on:
- Debt identification and valuation
- Mortgage and refinancing issues
- Joint debt risk management
- Business-related debt
- Student loan considerations
- Drafting or reviewing separation agreements
A clear understanding of debt helps you move forward with confidence. We offer a free 15-minute telephone or video consultation to discuss your circumstances and outline your options.
Contact us today to schedule an appointment.