Wiping Away Credit Debt After a Financially Messy Divorce


The total amount of revolving debt in Canada is more than $600 billion, and that doesn't include secured debt, like mortgages and car loans. When you carry a chunk of this debt on top of the expenses and difficulty of a divorce, you're paying interest every month just for the privilege of continuing to borrow the money. Make your financial footing more solid by evaluating your debt and taking concrete steps to get rid of it.

Manage Your Credit Report

When you have a lot of debt after a divorce, your credit report is a bit of a mess. It may be littered with late payments, collection accounts and credit cards dangerously close to their limits. Get a copy of your credit report for free each year from Experian, Equifax and TransUnion through AnnualCreditReport.com. Not only will this give you a full picture of what you owe, but you can also see if your accounts are being reported correctly. Disputing errors through the credit bureaus that provided the erroneous reports can help boost your credit score.

One of the main steps to restore your life and start over is to get out of debt and improve your credit score. This not only makes borrowing in the future less expensive, but can also help you get lower auto insurance rates and have an easier time renting a home. For newly separated or divorced people suffering from bad debt, renting an apartment or buying a car doesn't have to be as difficult as you might think. For example, former buy-here-pay-here dealerships offer auto loans with various repayment plans. Making payments on time will slowly but surely improve your credit score.

Create a Detailed Budget

Once you know what your debts are, it's time to make a plan for how to make consistent payments on them every month. Take full stock of the money coming in each month, then create a budget to plan how you will spend it. Start with necessary payments, like your housing, utilities and all of your debt payments. Then allocate any remaining money to variable expenses (gas, groceries) and luxuries (new clothes, entertainment and vacations). When you have a plan, you won't need to keep going into more debt each month to make ends meet.

Change Your Lifestyle Perception

Your lifestyle may drastically change after you're divorced, so changing your perception and expectations may be a necessary part of getting out of debt. If you embrace a frugal lifestyle and enjoy the good you do have in your life, it's a lot easier to forgo those things you see others getting that you can't afford. In the book "Living Well with Bad Credit," the authors encourage you to realize that the good life is subjective, and you can be perfectly happy even when your credit is horrible.

Use Extra Money to Pay off Debt

When you end up with unexpected money, don't spend it on things you don't actually need. Instead, pay off debt to lower your balances and reduce your monthly interest charges. For example, CBS reports that the average tax refund is $3,000. Putting this toward the typical credit card bill will save you over $500 on interest in the next year. If you get a raise at work, put that extra income toward debt repayment rather than expanding your lifestyle. You can also scrape together extra money by clipping coupons to save on grocery bills or foregoing usual luxuries like your morning latte. Putting all of this money toward debt repayment will help you get out of debt sooner.


Most people who go through divorce have a difficult time adjusting to the new financial reality. It's normal. The good news is that most can recover from it. The key is to be focussed on getting rid of your debt and living within your means. Winning the lottery is also helpful. 

The "Roll" of RRSP's in Your Separation and Divorce

Registered Retirement Savings Plans are the main savings vehicle for many Canadians, especially those who don't have a pension through their employment. As a result, upon separation and divorce, RRSP's are part of the property settlement. 

Our guest blog this week is  by Sandra Ramos, a well known financial advisor in Barrie, Ontario.  She has great advice about how to deal with RRSP's during your separation and divorce. 

For most couples, separating your assets can be the most challenging event of your separation, not only from the standpoint of “equalization” but also from a “taxation point of view”. RRSP’s, Registered Retirement Savings Plans add complexity to the equalization process due to their inherent tax implications. If you remove funds from your RRSP you will pay tax on the withdrawal and the amount will be added to your income in the year of the withdrawal. You can roll your RRSP’s to your spouse during the equalization process without immediate taxation, however, should your spouse use those assets to pay for legal fees or to get back on their feet financially, there will be taxes when withdrawn. This is an element that is often times overlooked during negotiations simply because the current dollar value is the only information being considered and not the net after tax effect. It is important if you are going to receive some part of your settlement in the form of an RRSP roll over from your spouse, that you tax the potential future tax implications into consideration.

Example if your spouse has $ 10,000 in an RRSP that he or she would like to roll to you as equalization payment for other property; you must adjust for taxes. If your personal marginal tax rate annually is 20% this RRSP asset should only be viewed as $ 8,000 after tax. Receiving assets inside an RRSP can be very beneficial to the recipient when handled and valuated properly, but it should not be viewed in the same way as cash or other property.

The involvement of a Financial Advisor or Accountant at this point in the equalization process is very important to ensure there is a thorough understanding of the taxation issues for your unique scenario. The collaborative process involves all of these elements for you, to ensure you understand the implications of the decisions you are making both from an asset valuation and forward taxation point of view.

I would love to hear some of your stories and thoughts regarding this topic and if you are interested in learning more about how I can assist you, please do not hesitate to give me a call at 1-866-949-1027 ext 235 and visit my website at www.sandraramos.ca.

Sandra Ramos, CFP

Senior Executive Consultant

Investors Group Financial Services Inc.

138 Commerce Park Drive

Barrie, Ontario  L4N 8W8

Forensic Accountants: A Lying Spouse's Worst Nightmare

Grant Webb of Bisk Education has many insights into the use of Forensic Accountants in divorce actions. Here is Grant's blog. Thanks Grant. 

No one goes into a marriage expecting to end up in divorce, but sadly almost half of all U.S. marriages end that way. Some people are able to end their marriages relatively peacefully, but for others, a collapsing marriage can quickly lead to hostility and anger. Resentments and dissatisfactions that have built up over time may explode into outbursts of temper and fierce arguments. Spouses may engage in deception or even drugs and alcohol as a form of retaliation or in order to escape or relieve the pain of their dissolving relationship, which in turn creates more animosity. In general, the more hard feelings and enmity there are in the relationship prior to the divorce, the more there will be during litigation, especially when there are substantial assets at stake.

In almost every case, at least one spouse knows that divorce is likely and sometimes they will proactively plan for the end of the marriage. For some people, those plans include hiding marital assets in an effort to retain full ownership of those assets after the divorce. Whether driven by greed, reprisal, or both, the bottom line is that spouses who hide assets will go to great lengths to prevent the other spouse from receiving any portion of those assets.

Depending on how long the person has to plan and how sophisticated they are, hidden assets can be difficult to find. Spouses who own a business or are a principal stakeholder in a business often have the easiest time of shielding assets from the court. Putting friends and family on the payroll, reporting large business losses or expenses, and accelerating depreciation schedules are all tricks that opportunistic spouses may use. Spouses in a marriage with a high net worth and complex investment portfolios also have ample opportunities to conceal assets. They can shift funds to overseas accounts or new, unreported personal accounts. They may also create false paper trails of investment losses to hide income, or invest in property or other assets in other states or countries. As concealment techniques get more complex, it becomes much more difficult to locate the hidden assets and to prove that they were generated with marital funds or other assets that should rightfully be included in divorce settlement hearings.

Family law and divorce attorneys are skilled professionals, but they are not trained or licensed to conduct the type of financial investigation that difficult divorce cases require. Although they have the best intentions of helping their clients achieve the most favorable financial end result, their skill set is not equal to or as effective as that of a forensic accountant. Forensic accountants are highly specialized licensed financial and accounting experts who are often able to reconstruct historical financial transactions and analyze bank statements, tax returns, and other documents to arrive at a true picture of a couple’s net worth and total assets. A forensic accountant is extremely adept at ferreting out financial misbehavior and is likely the last person that a deceitful spouse trying to conceal assets would want to deal with.

Attorneys will often examine public documents, tax returns, and bank statements to look for any irregularities. Forensic accountants will examine these same things, but at a much greater level of detail. Forensic accountants function like financial crime scene investigators. Many of them are also CPAs as a result of passing the uniform CPA exam. They gather every piece of evidence available at the smallest level of detail and then painstakingly reconstruct transactions and trace assets to identify anything that was originated using marital assets, and therefore subject to distribution to both spouses.

People are often surprised to find that forensic accountants also examine a spouse’s lifestyle, spending habits, and other personal habits. They may interview known associates, friends, and relatives and even past romantic interests to further their investigation. When it comes to bank and credit card accounts, forensic accountants don’t just look at current or recently closed accounts. They may go back years and examine every account a spouse has ever held, looking for clues that may indicate the spouse has transferred funds or opened new, unreported accounts.

Forensic accountants possess expertise in financial and accounting matters and a dogged determination to thoroughly examine every aspect of a person’s past and current financial and personal life. For this reason, spouses who are trying to hide assets from the eyes of the other spouse and the court system usually find that a forensic accountant is their worst nightmare.

For those that find themselves in situations that require the expertise of forensic accountants or CPAs, it is a best practice to research the qualifications of any given forensic accountant. This also helps in hiring the right CPA as well. 

Divorce and Financial Planning

Sandra Ramos is a financial planner who has helped many clients who are going through a divorce make good financial decisions about their future. Sandra graciously agreed to offer a guest blog with her insights. Here it is. 

Following any marriage breakdown there is a time of emotional healing, but there is also a need for financial healing. During a marriage we have often comingled our assets, income, goals and dreams. And when divorce occurs, it seemingly all unravels right before our eyes, leaving us feeling unsure about our financial future.

It is easy and somewhat naïve to suggest that all you need is a new Financial Plan. The reality is divorce can result in some significant changes financially and this can lead to a tremendous amount of stress for both parties. In extreme cases some individuals will not be able to meet their current obligations, let alone think about saving for the future.


The first and best financial decision you can make is to commit to the collaborative process during your separation and divorce negotiations. This process is designed to minimize feelings of animosity and therefore promote cooperation, communication and of course collaboration. From a financial point of view, the result is financial savings of potentially thousands of dollars.


The collaborative process is something that I promote in my practice because, I know that it will save my clients money, undue stress and create an environment of cooperation to ensure both parties walk away with what they need to start their new life on their own. This is even more important when there are children involved.


When the collaborative process is over and we have a written and signed a separation agreement and all of the details around finances and children have been agreed to, it is time for the next step. This is where the services of a Professional Financial Advisor are needed.


The first step for my clients is the budget. Most people dislike budgeting and cringe at the word. However, it is the essential first step in moving forward. We must identify with accuracy what are your regular monthly income and your necessary expenses. The difference between these two numbers will be your discretionary income; it is with this income we can re-plan and re-design your financial future.


There are many factors to organize and understand:


Tax Planning – understanding the changes to your Personal Taxes
Retirement Planning - RRSP’S, TFSA’S & Pension Plans
Estate Planning - New Will and Powers of Attorney & Life Insurance
Education Planning - RESP’S
Employer Benefits


I have 20 years of experience in the Financial Planning Industry and I have also experienced Divorce personally. I know how overwhelming this period in your life is; however by re-establishing your goals and taking control of your financial situation you will be on the right path toward financial independence.


If you are interested in learning more about how I can assist you please do not hesitate to view my website www.sandraramos.ca. Or contact me at 1-866-949-1027 x 235.

Sandra Ramos, CFP

Senior Executive Consultant

Investors Group Financial Services Inc.

138 Commerce Park Drive

Barrie, Ontario

L4N 8W8


Forensic Accounting and Divorce

image of couple pulling rings apartThe role of a Forensic Accountant in a divorce is not well known. Erin Palmer offers great insights into this valuable professional who can help uncover hidden assets or income of a deceptive spouse. Here is Erin's blog: 

All’s Fair in Love and War, Except in Divorce – That’s What Forensic Accountants Are For

You aren’t alone. Many couples considering divorce find themselves in a predicament they never expected to be in and begin to look at each other in a new light. Here’s one scenario: One spouse may be shuffling money around and squirreling it away. The other is offered a piteous settlement and is none the wiser, but instinctively feel that the numbers just don’t add up. Here’s a second scenario: One spouse offers the other a blunt settlement with no questions asked, without a way to alter the settlement later on. Both scenarios should be considered cautionary tales. If your intuition is telling you something isn’t adding up, or your divorce lawyer recommends getting a forensic accountant, you should listen. Large corporations aren’t the only ones guilty of moving and hiding assets these days.

Three Things You Should Know About Forensic Accountants

1.       Why You Need a Forensic Accountant

It’s such a simple question to ask, “Why?”, but the answers can vary greatly. An article posted, April 30, 2012, on the Wall Street Journal’s website gave staggering data from several studies…

·         31 percent of U.S. adults who join their earnings and savings with their spouse or significant other admitted they have been deceptive about money at times. – National Endowment for Financial Education

·         58 percent from the same study (mentioned above) admitted they hid cash, as well. – National Endowment for Financial Education

The Wall Street Journal article goes on to report something else of significance – technology is playing a larger role in discovering deceptive financial practices between couples.

·         During a 2010 survey, members of the American Academy of Matrimonial Lawyers were asked if in the past five years had they had seen an increase of information and evidence used that was gathered from social media/social networking websites (think Facebook, LinkedIn, Twitter). Can you believe that 81 percent of the members said yes?

·         Two years later the members were polled again with the same question and the number of lawyers answering yes climbed to 92 percent. That’s an increase of 11 percent in just two years.

2. What Forensic Accountants Look For

Forensic Accountants are highly trained professionals who may also possess a CPA license as a result of passing the Uniform CPA Exam. These financial professionals have received specialized training in locating financial information through research and technology. When a forensic accountant is assisting with a divorce, one of the first things they review are tax returns belonging to both parties. Believe it or not, a forensic accountant can learn a lot from a tax return such as real estate information, investments, partnerships and businesses, trusts and estates, and much more. Once they’ve reviewed this information, the forensic accountant can branch out and continue digging.

Other items forensic accountants look for are things like unreported retirement funds and decreased earnings being reported by the main bread winner. An unreported retirement fund is a deceptive practice. And decreased earnings may not be a red flag to most lay people, but to a trained professional this could lead to much more. They will look to see when the earnings first started to decrease and study as to whether they can put a tangible reason to the decrease or if it looks like money is being funneled in another direction.

Another task a forensic accountant may perform requires the use of specialized computer programs that can sift through all the data that is currently living on a hard drive or had once been there. Yes, even if data has been deleted from a drive, the information remains deep within the heart of the hard drive and these professionals have the ability to try and retrieve it.

The work of a forensic accountant isn’t always structured around finding a deceptive spouse. They also help lawyers create financial statements based upon their review of the couple’s assets. This has proven to be very helpful in creating an accurate financial picture that presiding judges can utilize to make his or her decision on the separation of assets.

3. If You Want It Done Right (Legally), Hire a Professional

When it comes to divorce, emotions can run high. And it’s natural to have your anger and frustration build. However, trying to take matters into your own hands is not advisable. If you have decided to Google or follow your spouse’s trail online and started finding information pertinent to your case, discuss this with your lawyer first.

The Wall Street Journal article “Why Hiding Money From Your Spouse Has Gotten a Lot Harder” mentions the grey area between following your soon-to-be former spouse’s online history versus putting a key logger on their computer. A key logger can be a piece of hardware or software installed on a computer that records the actions of whomever is using it.

If you are considering going rogue and ‘bug’ your spouse’s computer, it is very important that you talk to your lawyer first. More than likely they will advise against it and the information obtained may not be admissible during your legal proceedings. Not to mention, you could end up in legal trouble of your own.

If you are considering divorce and want to allocate your assets properly, or suspect your family’s assets have been mis-handled or-represented by your spouse, a forensic accountant will be your best line of defense next to your attorney. There are various reasons why you would hire this type of legal representation but for those who may not know the benefits to hiring a Forensic accountant or  how to hire the right CPA for your situation, it is highly suggested you research or interview multiple professionals in search for the best fit for your situation.

Erin Palmer writes about CPA exam review and CPA continuing professional education for Bisk Education.

Divorce and Debt: Tips to Get Out of Debt

Sophie Kinsella wrote an interesting blog about dealing with debt after divorce. Although the Oak View Law Group is not Canadian,it is  found in many of the states of the US, her comments ring true in Ontario too. It just makes good sense. Thanks Sophie.


Here’s is her blog…


Tips to follow in order to come out of your divorce debt

Many people believe that divorce is the beginning of a fresh new chapter in life, but that’s far from being true. Years of marriage often lead to years of accumulated debt, especially on the recent economic surface. Almost more than 50 percent of the divorce couples are under knee-deep debt and looking for a solution to come out of it. In this situation, it is generally not recommended to enroll on a debt settlement program as it sometimes becomes an intimidating task and hurts credit score. Instead, it is usually suggested to follow a few simple tips that will help you dig out of your divorce debt soon.


1. Budgeting:


One of the most important tips to come out of your divorce debt is to make a budget plan. Make a list of all the sources of your income and expenditures, and determine where your money goes out. You may do it on a paper or in a spreadsheet. Either way is good, but you have to see which one is more convenient for you.

2. Modify your spending habit:

Being a girl, you might have a few bad habits when it comes to shopping. You might often end up buying unnecessary goods and doing impulsive shopping. But now when it is crucial for you to come out of the debt, you must have a control over your spending habit. Always carry your budget along and abide by it. Every time you go for shopping, list down the items that you need to buy and are of utmost important. Make sure, an item which is not there in the list, should not be there in the cart.

3. Prioritize your expenditures:

When you are by yourself, you might wish to text your friend or log in to Facebook. But now it’s time to prioritize your expenditures. You must understand that now it’s time to focus on debt repayment rather than paying the bills.

4. Make some wise decision:

When you have come half the way of budgeting, make some wise financial decision. Think twice if you can do without the basic voice service on your cell phone in order to save $40 per month. Also think if you can bathe your dog by yourself instead of keeping a groomer. These are a few important questions that you need to ask yourself in order to determine how to reduce monthly expenses.

Also take a decision in regard to a debt payment plan. Determine how you are going to pay your bills. You may either pay the bills on a monthly budget cycle or may pay on a bi-weekly cycle, depending on your unique financial situation.

5. Snowball:

Consider repaying your debt in a snowball method. Aim at paying off your lowest balance first while making small amounts to the highest balance. This will help you pay off your debt and will boost your moral support.

In conclusion, afore mentioned are some effective tips to follow in order to get rid of your divorce debt.

New Pension Legislation in Ontario Effective January 1, 2012

image of money being split in halfMatthew Krofchuk has written a excellent blog at Divorce Happens Blog regarding the changes to the pension division legislation in Ontario which came into affect January 1, 2012. Matthew is with Krofchick Valuation so knows his stuff. 

The biggest impact of the new legislation is that you can now divided Ontario pensions at source if you want. So, let's say you have a pension worth $60,000. In the past, you would have to give your spouse $30,000 to equalize the value of this asset if all other assets and debts were equal. Now, you can arrange to have your pension plan transfer to your spouse $30,000 into a locked in savings vehicle (LIRA). 

Here is Matthew's blog... it explains it well.... 

Beginning January 1, 2012 new legislation passed by the Ontario legislature will result in a dramatic change in the way pension assets are divided between divorcing couples in Ontario. According to the Ontario Family Law Act (FLA), the value of married spouses’ pension assets must be included in family property, so the new pension rules could potentially affect a large number of married people in Ontario.

Are you one of them?

Well, for starters, the new rules – formally known as Bill 133 – only apply to spouses where no court order, family arbitration award, or domestic contract that provided for the division of pension assets between the two spouses was made before January 1, 2012. If you’ve entered into any one of these arrangements before the end of 2011, you’ll have to stick it out under the old rules.

The new rules also affect only those pensions covered by the Ontario Pension and Benefits Act, or in other words, provincial pensions. So if you or your spouse is a member of a pension plan that operates at a nationwide level like those available to federal public service employees or banks, for example, the value of the marital pension will be calculated in exactly the same way it was before. Provincial plans, however – like HOOPP, OMERS, and Ontario Teachers’ Pension Plan – will be directly affected by the new rules and there will be a number of changes divorcing spouses with pensions like these should be aware of.

The first major change involves just who’s calculating the value of the pension. Pensions are currently valued by third party actuaries retained either by one (or both) of the divorcing spouses or their lawyers. The new rules, however, no longer give divorcing couples this option. Beginning in 2012 divorcing spouses will have to apply directly to the pension plan administrator to calculate the value of the pension to be divided as net family property. You will need to appeal to them directly by filling out a form from the Financial Services Commission of Ontario’s (FSCO) website and they will likely charge a fee for their services.

The new rules also allow divorcing spouses to transfer the value of the member spouse’s pension in the form of a lump sum payment if they desire; this option was not available under the old rules. Previously, the only way that a spouse could receive their portion of their partner’s pension was either as a percentage of monthly pension benefits, when they became payable, or indirectly through negotiating their settlement (kind of a, “you get the house and I’ll keep my pension” arrangement). It’s important to know that this new lump sum option is just that: an option. Spouses can still elect to go at it the old fashioned way if they desire.

The last big change involves how the value of the pension is calculated. As they relate to pension valuation the new rules don’t contain any provisions that require the spouses to do anything over and above what they already do; you still have to get that pension valued. However, the pension administrators – now the folks in charge of calculating the value of these pensions – will not be applying traditional actuarial practices in valuing them. The new rules mandate that all pension valuations be performed using a prescribed formula that should apply to all pensions.

This last change appears to result from an effort by the province to minimize conflict and lengthy court proceedings. By setting out a simple formula for the administrators there’s very little room for either party to argue or to revisit the calculation at some later date in light of a change in circumstances, both of which were not uncommon under the old rules. The downside to this approach, however, is that not all pensions are created equal (and certainly, not all divorcing couples are either). The new rules don’t make any provisions for the kinds of unique circumstances that could impact the value of pensions – like retirement ages or health issues – but unless the Courts decide that these issues should be taken into account as they arise, we’re probably stuck with them for the time being.

By Matthew Krofchick

Why Do I Need To Do A Sworn Financial Statement?

Everyone hates having to do a sworn financial statement. This is a court form used in Ontario to list your assets, debts, income and expenses.  It is long, cumbersome and, frankly, a pain to complete. If your case is in Court in Ontario, you must complete the form. The Rules require you to complete it and the court clerks won't even open your court file without you filing a sworn financial statement.

If you aren't in court, I don't blame you if you don't want to complete it.

As your lawyer, we ask you to do a financial statement to ensure that you are protected. Yes, to protect you! We want you to fully disclose your assets and debts on the date of separation and date of marriage to ensure that your spouse cannot wiggle their wait out of the agreement, claiming that you were hiding assets. The Family Law Act allows the Court to "set aside" (which means not enforce) a separation agreement if there has not been full disclosure. 

The financial statement is an easy way to ensure that there has been full disclosure. It is like a checklist for lawyers. 

We ask your spouse to provide a sworn financial statement for the same reasons. It is an easy way to ensure we have a complete financial picture from him or her too.  

Once we have a complete financial picture, we can advise you as to the range of outcome should the matter proceed to court. In other words, we can give you legal advice. Without complete disclosure, we can't give you advice: we are just guessing.

Lawyers can get into big trouble with the Law Society if we give advice based on guesses or assumptions that turns out to be bad advice. Okay... you got me... we are also covering our own butt when we are asking for sworn financial statements. 

Disclosure is Essential

It isn't the financial statement itself that is important - what is important is that there is full disclosure. It's just that the financial statement makes it easy. 

A recent case before the Ontario Court of Appeal, known as Ward vs Ward clearly states that the exchange of financial statements is not necessary but full disclosure and knowledge of the other person's financial circumstances is essential. In that case, the parties exchanged some documentation with the assistance of the family's accountant. Financial statements were not completed but there was full disclosure and knowledge of each other’s financial circumstances.

The court describes the disclosure process in that case as follows:

“...neither party filed a financial statement, nor was one required under the terms of the process to which they agreed. While this did not diminish the obligation to disclose, in this case, the parties relied on the collaborative law process and other avenues of disclosure, including net family property statements and information from Mr. Wetstein [the family friend and accountant]”

In the end, the Ontario Court of Appeal determined that the husband's disclosure and the wife's knowledge of financial circumstances of the husband were sufficient even without sworn financial statements exchanged. The Court refused to set aside the agreement reached.  

Lawyers often use the financial statement because it is easy. It lists all of the categories of assets and debts so you don't miss disclosing something important. In our law firm, we insist on backup documentation to verify every value in the financial statement. It is the backup documentation that is important and fulfills the obligation to disclose. 

Collaborative Cases

In Collaborative cases, the Financial Specialist works with the clients to obtain a complete and accurate representation of the financial circumstances of the parties, usually without the use of a sworn financial statement. The Financial Specialist does a report and attaches the backup documentation for every value. Both lawyers ensure that their client has fully disclosed everything. Equally important, every lawyer must review what the other client has provided to ensure s/he has provided full disclosure. 

In Collaborative cases, as lawyers we always carefully review the Financial Specialist's report with our client to ensure it is accurate. Ultimately, the lawyers will ask for a sworn statement from each client stating that they have fully disclosed their assets, debts and income and that the Financial Specialist's report is accurate and complete. Alternatively, the lawyers will add wording to the separation agreement that states both parties are warranting that they have fully disclosed everything and that the Financial Specialist's report is accurate. Either way works. 

Full disclosure is essential. If you are trying to hide assets or income, we won't be your lawyer. We don't play those games. 

If you don't like having to provide full disclosure, we get it. You are not alone. Complain all you want. We have big shoulders. We want your agreement done right and made to last so just get it done. It’s for your own sake. 


Division and Equalization of Property in Barrie Ontario

Property Division in OntarioThe division of property after separation raises many questions: How is it divided? Do we have to sell the house? Do I have to share my pension? What about my inheritance? 

The uncertainty leads to many sleepless nights. Everyone fears they will end up with nothing. The classic country song by Jerry Reid comes to mind for many: "She Got the Gold Mine, I Got the Shaft".(Women may insert "He" instead of "She" in the title and lyrics. The fear is the same for both genders.)

In Ontario, some of the uncertainty is eliminated by the Family Law Act which describes a formula so both you and your spouse end up with about the same net property. It looks like this:

+ Add up your assets on the date of separation

- Subtract your debts on the date of separation

Subtract any gifts from third parties, inheritances or proceeds from a personal injury claim received during the marriage which were kept separate and are still in existence on the date of separation

Subtract your assets less any debt you had on the date of marriage.

The resulting number is called your Net Family Property (NFP). Your spouse does the same calculation.

÷ 2  If your NFP number is higher than your spouse’s NFP number, you owe half the difference so as to make the NFP's equal.

Here is an example:

Home (Jointly Owned) worth $240,000 $120,000 $120,000
Cars (Fair Market Value) $20,000 $12,000
Pensions $60,000 NIL
RRSP (deduct 25% for taxes) $10,000 $45,000
Snowmobiles (Fair Market Value) $5,000 NIL
Total A $215,000 $177,000
Mortgage $80,000 $80,000
Visa $10,000 $7,000
Car Loan $8,000 NIL
Total B $98,000 $87,000
Snowmobile - Gift From Parents $5000 NIL
Total C    
Pension $15,000 NIL
RRSP NIL $5,000
Car $3,000 $4,000
Car Loan NIL ($2,000)
Total D $18,000 $7,000

To Summarize:

Total A (Assets) $215,000 $177,000
Minus Total B (Debt) ($98,000) ($87,000)
Minus Total C (Gifts, Etc) ($5,000) NIL
Minus Total D (D of M) ($18,000) ($7,000)
Net Family Property $94,000 $83,000

DIFFERENCE $94,000 - $83,000 = $11,000


Once the Husband pays the Wife $5,500.00, each will have $88,500.

The Home: In this example, the home is jointly owned. If the Husband wants to purchase the Wife’s interest in the home, he would have to pay his Wife the equalization of $5,500 plus pay her for her one half interest in the home. This is calculated as $120,000 minus the mortgage of $80,000 equals $40,000. So, the Husband would have to pay the Wife $40,000 plus $5,500 for a total of $45,500. The Husband would then own the house solely and paid out his Wife. Alternatively, the house could be sold and sale proceeds divided or the Wife could buy out the Husband's interest. 

Ownership: You and your spouse keep the assets and debts in your own names. So, all we deal with in Ontario is the value of the various assets and debts. You don't have an ownership interest in your spouse's pension or other assets. Just a potential right to an equalization payment if they have more stuff (a larger NFP number) than you. 

Household Contents: If you want help dividing up the furniture and other items in the home, here is a blog about it. 

Adjustments: You may wish to to adjust the assets or debts so as to equalize the NFP numbers and avoid an equalization payment. So, in this example, the Husband might give his Wife some of his assets or take on some of her debt so there is no equalization payment owed. 

Excluded Property: An inheritance, a gift from a third party or a payment for a personal injury which is received during the marriage is not shared. If it was used to pay joint debts or invested into a jointly owned asset or is spent, it cannot be deducted. 

Equalization of property in Ontario

Debts: I often hear complaints from clients about having to take into consideration debts incurred by their spouse without their consent or knowledge. It is very frustrating. The law says that the reason debts were incurred does not matter except if it was for an illegal purpose. Your debts (meaning the ones in your name) are yours and your spouse’s debts remain your spouse’s debts, and jointly owed debts are shared. But everything is balanced out by the equalization process. If you have more debts than your spouse, your spouse may have to make an equalization payment to balance everything out.

Whole Picture: Some clients get confused because they want to equalize each asset or each debt one at a time. You have to look at the whole picture, using the formula above, and not look at individual assets or debts.

Unequal Equalizations: In rare cases, it is possible to ask for an “unequal equalization” if ordering an equalization payment according to the normal formula would be “unconscionable”. Our lawyers can help you determine if your case would be an exception to the general rule.

We have seen many people get the equalization calculation wrong, including other lawyers. Our lawyers only do family law and work with equalization calculations every day. We can help you get it right.

Case Study: If you are interested in reading how a typical case is resolved, read this article. 

Personal Insights: When I went through my own divorce (yes, divorce lawyers can get divorced... just like doctors can get sick), I learned some personal lessons. Here they are.

Perhaps Jerry Reid wasn't living in Ontario when he wrote the lyrics to his famous and hilarious song: 

Well, she got the gold mine!
I got the shaft.
They split it all down the middle,
And then they give her the better half.
Well, I guess it all sounds funny,
Hoo, hoo, hoo, ha-ha-ha-ha-ha!
But it hurts too much to laugh.
She got the gold mine - I got the sha-a-aft.

... or maybe he just retained the wrong law firm! 

How a Barrie Divorce Lawyer Divides Up The Household Contents

Household contents fighing over a roller pinHave you ever fallen in love with something only to have it break, get lost or stolen? Maybe it was a special coffee mug, a favorite blanket or a stuffed toy. Gone forever.

I remember having an emotional attachment to special belt buckle. When it was lost, I was at first angry and then I almost cried. Eventually I felt silly for becoming so attached to a "thing".

In hindsight,  I now realize that it wasn't the belt buckle that was special but rather it was the memories it represented.

It was the first buckle I ever won showing horses. It represented hours of hard work and dedication to achieve a goal. As a teenager, it was very special to me.

The division of household contents is often a contentious issue when clients are separating or divorcing. Normally clients lament the cost of replacing items but, in most cases, if you drill deep enough, it is an emotional loss that fuels the fight. It's not really about "the thing".

For example, spending thousands of dollars on legal fees fighting over a used electric kettle worth $2.00 does not make sense on the basis of the value of the item but if that kettle represents the hopes and dreams of domestic bliss or memories of happier days, its value is priceless.

Perhaps fighting over your kettle is your way to avenge the hurt caused by your spouse. There are many reasons for steamy conversations about a kettle but ask yourself "what is the real issue here?"

I encourage clients when thinking about the division of household contents to ask themselves "In five years, will it matter to me if I have this item or not?"

"Fifteen years from now, will I be proud to tell my grandchildren about how we resolved the division of household contents?"

This helps you make priorities and keep things in perspective. Things of a lesser priority can be bargained away to get things of greater importance. Deals can be made and settlement achieved, cost-effectively.

Jason Brown in his blog at Minnesota Divorce and Family Law Blog has an excellent article in which he lists some great methods for dividing up the household contents. He suggests the following:

* Two Lists: One of you makes two lists of items, of roughly equal value. The lists are presented to the other. The person who didn't draft the lists gets to pick which list they want. There is an incentive for the person drafting to fairly and equitably divide things or they'll get burned during the selection process.

* Silent Auction: This is my favorite. A master list of all of your personal property is created. Each party blindly puts a dollar value next to each item. The high bid takes the item at the value listed. Once all items are bid on, the totals for each party are added up. The party receiving the higher dollar value pays the other a cash equalizer to make up the other's shortfall. Parties are free to place a high value on items they really want, but won't list a ridiculous bid out of fear of paying a large offset.

* Arbitration: An arbitrator is basically a private judge. You pay this person, usually a lawyer, to listen to your side of things in an informal conference setting. Then, your spouse does the same. The arbitrator is given the authority to divide the entire list of items as they deem fair and equitable. Costs are saved because the parties attend the arbitration without counsel and divide the arbitrator's fee. Most couples submit to binding arbitration so that the decision of the arbitrator is final.

* Rotating Lists: Make a master list and take turns going back and fourth until all of the personal property is divided. Flip a coin to see who goes first.

However you divide up your things, remember you won't get everything you want and that's okay.  It just creates the new challenge of finding replacement items for reasonable prices. You can always go to garage sales or look online for bargains at Craigslist or  Kijiji. Shop around. You'll be surprised how little it will cost and how much fun it is to replace those missing items.

In ten years most of the stuff you are arguing about will be safely lodged in a dump somewhere, rotting away to eternity. It really isn't worth the cost or energy to fight over them now.

So save yourself from paying legal fees. Don't fight about your household contents. Just go replace your old junk with other people's old junk... and make them part of your "new home"... a place for "new memories".

... but if you see my belt buckle, shoot me an email. I still miss it!