Spouse Drained the Joint Account or Line of Credit After Separation: What Now?

Separation sometimes starts with a shock at the bank: the joint chequing account is empty, savings have been moved, or a shared line of credit has been drawn to its limit. The question is usually what you can do about it, and how fast.

BC's Family Law Act does not let one spouse take family property simply by withdrawing it first. It sets rules for what is shared, gives the court tools to protect property while the case is decided, and lets the court adjust the division where a spouse has reduced or moved family property.

Money in a joint account is usually family property

Under section 84 of the Family Law Act, family property includes property owned by at least one spouse on the date the spouses separate. Money in a joint account on that date is generally family property, and so is money in an account in one spouse's name alone, unless it is excluded property such as certain gifts or inheritances.

Section 81 then says that on separation each spouse has a right to an undivided half interest in all family property, and is equally responsible for family debt, unless an agreement or order provides otherwise. Family property is generally valued at the date of an agreement dividing it or the date of the court hearing.

So if your spouse withdrew the balance of a joint account after separation, the money did not stop being family property because it moved. Property acquired after separation that is derived from family property is also family property. The withdrawal is accounted for when property is divided. Our article on dividing family property in BC explains the general rules.

What about a line of credit run up after separation?

Section 86 defines family debt as financial obligations incurred by a spouse during the relationship up to separation, and after separation only if incurred to maintain family property. Borrowing after separation for other purposes, such as a spouse's own living costs or a new purchase, is generally not family debt to be shared between the spouses.

That is the position between you and your spouse. The lender is a separate matter. If you are both borrowers on a joint line of credit or credit card, the credit agreement may let the lender collect the full balance from either of you, whatever family law later decides about who should bear it. That is why stopping further draws quickly matters.

Steps to take with your bank

• Get the records. Download or request statements for every joint and individual account, credit line and card, going back before separation.
• Ask about joint accounts. Banks have different rules and products. Ask what can be done to stop further withdrawals, for example requiring both account holders to approve transactions, or freezing or closing the account.
• Ask about joint credit. Ask whether the limit can be reduced, the line frozen or new advances stopped, and what notice the bank needs from you as a co-borrower.
• Redirect your income. Have your pay deposited to an account in your own name, and keep paying essential joint bills where you can so the debt does not grow through missed payments.
• Do not retaliate. Emptying an account yourself to "protect" the money can be treated the same way as your spouse's withdrawal. Get advice before moving family funds, and keep a record of what you do and why.

Court orders that can protect property

Where money or assets are at risk, the Supreme Court has several tools under the Family Law Act:

• Restraining orders. Under section 91(1), on a spouse's application the court must make an order restraining the other spouse from disposing of property at issue, unless the other spouse shows that the claim will not be defeated or adversely affected by the disposal.
• Preservation orders. Section 91(2) allows orders for the possession, delivery, safekeeping and preservation of property, and orders prohibiting a spouse from transferring or converting property in which the applicant may have an interest.
• Applications without notice. Section 91(3) lets the court make these orders before notice of the application is served on the other spouse, which can matter where money is moving quickly.
• Interim distribution. Under section 89, the court can order an interim distribution of family property to fund family dispute resolution, a court proceeding, or the gathering of evidence, if it would not harm the other spouse's interests.

The court can also make interim orders for support while the case continues. These applications are made within a family law case, so if none has been started yet, one usually needs to be.

Unequal division when a spouse reduces family property

At the end of the case, section 95 allows the court to divide family property or family debt unequally if equal division would be significantly unfair. The factors it may consider include:

• Reducing or disposing of family property. Whether a spouse, other than one acting in good faith, substantially reduced the value of family property, or disposed of, transferred or converted it so that the other spouse's interest was defeated or adversely affected.
• Changes after separation. Whether a spouse caused a significant decrease or increase in the value of family property or family debt beyond market trends after separation.
• How the debt arose. Whether family debt was incurred in the normal course of the relationship.

An unequal division is not automatic. The court will want evidence of what was taken, when, and what it was used for, which is why early records matter. Some withdrawals, such as paying ordinary household bills or the mortgage, may be treated very differently from transfers to a new account or large discretionary spending. If you are just starting out, our first-steps checklist for separating in BC covers the other early decisions.

Money moved after separation? Protect your share now

Our family lawyers can review the account records, advise you on bank steps, and apply for orders to preserve family property and account for what was taken.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.