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Difference between revisions of "Protecting Property and Debt in Family Law Matters"

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Protecting Property and Debt in Family Law Matters (view source)

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Once you've decided that your relationship can't continue, and you're sure that it can't continue, you need to separate. This doesn't mean that you and your spouse need to move into separate homes, but you need to announce your <span class="noglossary">decision</span> and you should probably do it in writing so that you have a record of the date of separation.  If you continue to live in the same home after you have separated, you must ensure that you live separate lives (i.e. you close joint accounts, you do not do laundry or cook dinner for your spouse, you do not go out as a couple or hold yourself out as a couple at social events) or your spouse may allege that you reconciled or you changed your mind after announcing the separation.
Once you've decided that your relationship can't continue, and you're sure that it can't continue, you need to separate. This doesn't mean that you and your spouse need to move into separate homes, but you need to announce your <span class="noglossary">decision</span> and you should probably do it in writing so that you have a record of the date of separation.  If you continue to live in the same home after you have separated, you must ensure that you live separate lives (i.e. you close joint accounts, you do not do laundry or cook dinner for your spouse, you do not go out as a couple or hold yourself out as a couple at social events) or your spouse may allege that you reconciled or you changed your mind after announcing the separation.


If you own your home in joint tenancy with your former spouse, there is no reason to sever the joint tenancy in order to protect your interest in the home. The reason for that is because under s. 81(b) of the provincial ''[[Family Law Act]]'', when separation happens each spouse takes a one-half interest in all family property as tenants in common, regardless of how the property was owned before separation, and becomes responsible for one-half of all family debt.   
If you own your home in joint tenancy with your former spouse, there is no reason to sever the joint tenancy in order to protect your interest in the home. The reason for that is because under section 81(b) of the provincial ''[[Family Law Act]]'', when separation happens each spouse takes a one-half interest in all family property as tenants in common, regardless of how the property was owned before separation, and becomes responsible for one-half of all family debt.   


It can be critical to protect your share of the family property from creditors, your spouse's bankruptcy, or court orders made in other court proceedings. While it's always a good idea to consult with a lawyer if you have a family law problem, be especially sure to do so if you're not certain whether separating would be helpful or harmful.
It can be critical to protect your share of the family property from creditors, your spouse's bankruptcy, or court orders made in other court proceedings. While it's always a good idea to consult with a lawyer if you have a family law problem, be especially sure to do so if you're not certain whether separating would be helpful or harmful.
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====Notices and financing statements under the ''Family Law Act''====
====Notices and financing statements under the ''Family Law Act''====


Spouses who have made a cohabitation agreement, a marriage agreement, or a separation agreement dealing with real property can file a ''notice'' of the agreement against the title of the property with the Land Title and Survey Authority under s. 99 of the ''Family Law Act''. A notice can be filed whether court proceedings have started or not, and will prevent the other spouse from transferring, selling, leasing, or otherwise dealing with the property without the voluntary cancellation of the notice or a court order.
Spouses who have made a cohabitation agreement, a marriage agreement, or a separation agreement dealing with real property can file a ''notice'' of the agreement against the title of the property with the Land Title and Survey Authority under section 99 of the ''Family Law Act''. A notice can be filed whether court proceedings have started or not, and will prevent the other spouse from transferring, selling, leasing, or otherwise dealing with the property without the voluntary cancellation of the notice or a court order.


A ''financing statement'' can be filed in the [http://www.bcregistryservices.gov.bc.ca/bcreg/pprpg/ppinfo.page Personal Property Registry] against a manufactured home under s. 100. This will stop the manufactured home from being transferred, and any new debts registered against the manufactured home will come in second to the spouse's interest under the financing statement.
A ''financing statement'' can be filed in the [http://www.bcregistryservices.gov.bc.ca/bcreg/pprpg/ppinfo.page Personal Property Registry] against a manufactured home under section 100. This will stop the manufactured home from being transferred, and any new debts registered against the manufactured home will come in second to the spouse's interest under the financing statement.


===Make sure the rent gets paid and the lights stay on===
===Make sure the rent gets paid and the lights stay on===
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<blockquote><blockquote><tt>(b) prohibit a party from terminating specified utilities for a residence;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) prohibit a party from terminating specified utilities for a residence;</tt></blockquote></blockquote>


Most of the time, people don't stop paying the mortgage or cut off the electricity to the former family home when they move out. However, it can be very tempting to do this when emotions are running high, when there's not enough money to pay rent at the new place plus rent for the old place, or when the BC Hydro <span class="noglossary">account</span> at the former family home is in the name of the person who needs to arrange for the electricity to be hooked up at their new place. The court is not likely to make orders under s. 226 when there's not enough money to pay for everything, but it will step in where someone is acting out of spite or malice.
Most of the time, people don't stop paying the mortgage or cut off the electricity to the former family home when they move out. However, it can be very tempting to do this when emotions are running high, when there's not enough money to pay rent at the new place plus rent for the old place, or when the BC Hydro <span class="noglossary">account</span> at the former family home is in the name of the person who needs to arrange for the electricity to be hooked up at their new place. The court is not likely to make orders under section 226 when there's not enough money to pay for everything, but it will step in where someone is acting out of spite or malice.


==Financial restraining orders==
==Financial restraining orders==
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===The ''Family Law Act''===
===The ''Family Law Act''===


The easiest way for married and unmarried spouses to obtain a financial restraining order is to apply for an order under s. 91(1) of the ''Family Law Act''. This section says that:
The easiest way for married and unmarried spouses to obtain a financial restraining order is to apply for an order under section 91(1) of the ''Family Law Act''. This section says that:


<blockquote><tt>(1) On application by a spouse, the Supreme Court must make an order restraining the other spouse from disposing of any property at issue under this Part or Part 6 until or unless the other spouse establishes that a claim made under this Part or Part 6 will not be defeated or adversely affected by the disposal of the property.</tt></blockquote>
<blockquote><tt>(1) On application by a spouse, the Supreme Court must make an order restraining the other spouse from disposing of any property at issue under this Part or Part 6 until or unless the other spouse establishes that a claim made under this Part or Part 6 will not be defeated or adversely affected by the disposal of the property.</tt></blockquote>
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===The Rules of Court===
===The Rules of Court===


Rule 12-4 of the [http://canlii.ca/t/8mcr Supreme Court Family Rules] gives the court the authority to make a general restraining order, also called an ''injunction'', to make someone to do something or not do something. The potential scope of these restraining orders is very broad, and can include, for example, a restraining order identical to that provided for in s. 91 of the ''Family Law Act'' as well as an order stopping someone from racking up debt by drawing on credit cards and lines of credit.
Rule 12-4 of the [http://canlii.ca/t/8mcr Supreme Court Family Rules] gives the court the authority to make a general restraining order, also called an ''injunction'', to make someone to do something or not do something. The potential scope of these restraining orders is very broad, and can include, for example, a restraining order identical to that provided for in section 91 of the ''Family Law Act'' as well as an order stopping someone from racking up debt by drawing on credit cards and lines of credit.


Rule 12-4 says little more, that "the court can issue an injunction." A 1986 case of the British Columbia Court of Appeal, ''[http://canlii.ca/t/1q5c1 British Columbia v. Wale]'', 1986 CanLII 171 (BCCA), offers some guidance. In that case, the court held that someone applying for an injunction had to prove three things. In a family law context involving unmarried parties, these are that:
Rule 12-4 says little more, that "the court can issue an injunction." A 1986 case of the British Columbia Court of Appeal, ''[http://canlii.ca/t/1q5c1 British Columbia v. Wale]'', 1986 CanLII 171 (BCCA), offers some guidance. In that case, the court held that someone applying for an injunction had to prove three things. In a family law context involving unmarried parties, these are that:
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#separate from your spouse, to convert the ownership of all property to a shared ownership between you and your spouse as tenants in common,
#separate from your spouse, to convert the ownership of all property to a shared ownership between you and your spouse as tenants in common,
#register a CPL against all real property in which your spouse has an interest, and
#register a CPL against all real property in which your spouse has an interest, and
#obtain a financial restraining order under one or more of s. 91 of the ''Family Law Act'', s. 39 of the ''Law and Equity Act'', or Rule 12-4 of the Supreme Court Family Rules.
#obtain a financial restraining order under one or more of section 91 of the ''Family Law Act'', section 39 of the ''Law and Equity Act'', or Rule 12-4 of the Supreme Court Family Rules.


The problem here is that property that is owned only by your spouse, or by both of you as joint tenants, may be vulnerable to your spouse's creditors and in the event of their bankruptcy. Say, for example, your spouse has put up their car as collateral for a loan. You would normally be entitled to one-half the car's value as a family property, assuming the car was bought during your relationship. If your spouse defaults on the loan, the car can be seized and you could find, especially where there are few other assets, that you get no compensation for your interest in the car's value once the lender's default fees and legal fees are added on.
The problem here is that property that is owned only by your spouse, or by both of you as joint tenants, may be vulnerable to your spouse's creditors and in the event of their bankruptcy. Say, for example, your spouse has put up their car as collateral for a loan. You would normally be entitled to one-half the car's value as a family property, assuming the car was bought during your relationship. If your spouse defaults on the loan, the car can be seized and you could find, especially where there are few other assets, that you get no compensation for your interest in the car's value once the lender's default fees and legal fees are added on.
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<blockquote><blockquote><tt>(iv) provide for any other matter in connection with the extraprovincial property;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(iv) provide for any other matter in connection with the extraprovincial property;</tt></blockquote></blockquote>


The first stumbling block is to figure out whether the court can divide the out-of-province property, and that requires a difficult analysis under ss. 106, 107, and 108 of the Act. Assuming the court can make such orders, the next step is to find out whether the order would be "enforceable against a spouse" in the place where the property is located. If the <span class="noglossary">answer</span> to both questions is yes, then the court may make an order for the preservation of the foreign property.
The first stumbling block is to figure out whether the court can divide the out-of-province property, and that requires a difficult analysis under sections 106, 107, and 108 of the Act. Assuming the court can make such orders, the next step is to find out whether the order would be "enforceable against a spouse" in the place where the property is located. If the <span class="noglossary">answer</span> to both questions is yes, then the court may make an order for the preservation of the foreign property.


This part of the Act is extremely complicated and you should get advice from a lawyer whenever you may need to deal with movable and immovable property located outside of British Columbia.
This part of the Act is extremely complicated and you should get advice from a lawyer whenever you may need to deal with movable and immovable property located outside of British Columbia.
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Bank accounts, stocks, investment accounts, and similar assets that aren't real estate are called movable assets. The BC Supreme Court usually has jurisdiction over movable assets located outside of the province where the owner has attorned to the jurisdiction and accepted the court's authority.
Bank accounts, stocks, investment accounts, and similar assets that aren't real estate are called movable assets. The BC Supreme Court usually has jurisdiction over movable assets located outside of the province where the owner has attorned to the jurisdiction and accepted the court's authority.


Where a spouse has attorned, the court can make a restraining order stopping the spouse from disposing of movable property located outside of British Columbia under s. 91 of the ''Family Law Act''. Inside British Columbia, a s. 91 order will stop a spouse from dealing with everything that is family property or other ''property at issue'', including real property. Outside British Columbia, a s. 91 restraining order will only stop a spouse from dealing with movable assets.
Where a spouse has attorned, the court can make a restraining order stopping the spouse from disposing of movable property located outside of British Columbia under section 91 of the ''Family Law Act''. Inside British Columbia, a section 91 order will stop a spouse from dealing with everything that is family property or other ''property at issue'', including real property. Outside British Columbia, a section 91 restraining order will only stop a spouse from dealing with movable assets.


The court can be reluctant to issue a s. 91 order that is intended to deal with assets located outside the province, since in most cases the courts of British Columbia cannot make orders about things located outside the province. In a 2002 case called ''[http://canlii.ca/t/50dw Boyd v. Boyd]'', 2001 BCCA 535, the Court of Appeal confirmed that the court can make ''in personam'' restraining orders that are effective against movable assets located outside the province.
The court can be reluctant to issue a section 91 order that is intended to deal with assets located outside the province, since in most cases the courts of British Columbia cannot make orders about things located outside the province. In a 2002 case called ''[http://canlii.ca/t/50dw Boyd v. Boyd]'', 2001 BCCA 535, the Court of Appeal confirmed that the court can make ''in personam'' restraining orders that are effective against movable assets located outside the province.


It is important to remember that a section 91 order is an ''in personam order'', which means that it is only effective against the person to whom the order is being made.  Accordingly, if your spouse has a significant amount of money in a bank account,  investment account, or similar type of savings vehicle, and you are concerned that your spouse will transfer the monies somewhere else even if there is an order in place, then you should ensure that the financial institution where the accounts are being held are named in the notice of application, the financial institution is served with your application, and that you seek specific relief vis-à-vis the financial institution.  Otherwise, the financial institution does not have any legal obligation to prevent your spouse from transferring assets out of the financial institution.
It is important to remember that a section 91 order is an ''in personam order'', which means that it is only effective against the person to whom the order is being made.  Accordingly, if your spouse has a significant amount of money in a bank account,  investment account, or similar type of savings vehicle, and you are concerned that your spouse will transfer the monies somewhere else even if there is an order in place, then you should ensure that the financial institution where the accounts are being held are named in the notice of application, the financial institution is served with your application, and that you seek specific relief vis-à-vis the financial institution.  Otherwise, the financial institution does not have any legal obligation to prevent your spouse from transferring assets out of the financial institution.


If a s. 91 order is not available for some reason, a ''Mareva'' injunction will have the same effect. However, ''Mareva'' injunctions are not granted automatically and you must satisfy the test described just above.
If a section 91 order is not available for some reason, a ''Mareva'' injunction will have the same effect. However, ''Mareva'' injunctions are not granted automatically and you must satisfy the test described just above.


==Resources and links==
==Resources and links==
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