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In Canada, are one spouse's business HST arrears considered part of family debt that is to be split between spouses upon separation?

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Is debt of a spouse divisible upon separation?

The answer will depend on the provincial statute relating to property division upon separation.

Some provinces direct that debt held by either spouse, and incurred during the spousal relationship, is to be divided equally (BC and Ontario, for example). Others do not consider debt to be strictly part of the property to be divided (e.g. Saskatchewan, although debt is a factor that can be considered by a judge in deciding whether to deviate from an equal division of the family property). To determine what is included in family property (or family debt, where applicable), you must read the relevant statute in your jurisdiction.

Is the debt of the company the debt of a spouse?

Also relevant is form of the business. If it is a general partnership, then the HST arrears are considered debts of the partners. If instead it is a kind of limited partnership or corporation, the debt will be that of the company, not of the spouse. However, a share or interest in a company is considered family property. The value of a spouse's share or interest in company will be lower if the company owes HST arrears. But in that case, there is no need to even think of the debt as a special category; it will just be priced into the value of the company by a competent auditor.

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