Two Different Questions About Family Debt: Sharing the Cost and Owing the Lender

Money borrowed during a relationship can leave two separate disputes after separation. The first is between the former spouses: how should they share the financial burden? The second is between a lender and a borrower: who promised to repay the money? Treating those questions as interchangeable can lead to a serious mistake.

Lan v Buchanan, 2026 BCCA 370, decided September 4, 2026, explains the distinction. Clark Wilson discussed it in an October 26, 2026 article. We reviewed the appeal reasons to prepare this independent explanation of what the ruling means for separating families in the Okanagan.

How a family loan became a separate civil claim

Ms. Lan and her former partner, Mr. Buchanan, had used money advanced by relatives to help finance property projects. In their family proceedings, the trial judge determined that advances from Mr. Buchanan's mother were loans rather than gifts, classified them as family debt and allocated responsibility between the former spouses.

The mother subsequently sued Ms. Lan for the portion allocated to her and obtained summary judgment for $248,120.60. The difficulty was that the family-debt decision had not established that Ms. Lan was contractually a borrower. At least one written loan agreement appeared to be between the mother and her son alone. Ms. Lan appealed the judgment against her.

A family-debt order is not a new loan agreement

At paragraphs 49–55, the Court of Appeal considered sections 82 and 97(3) of the Family Law Act. Those provisions preserve third-party rights and make clear that an order allocating family debt operates between the spouses. The allocation does not rewrite an agreement with a lender or create a creditor-debtor relationship that did not otherwise exist.

A debt incurred by one spouse can still be family debt for the purposes of dividing responsibility at separation. That classification may give the borrowing spouse a contribution claim against the other spouse within the family proceedings. It does not, without more, give the lender a contractual claim against that other spouse. The lender must establish the legal basis for repayment from the person being sued, including any relevant written or oral agreement.

What the appeal decided—and what it left open

The Court of Appeal set aside the summary judgment and dismissed the application for that judgment. The family-debt order alone was not sufficient to establish the mother's entitlement to collect directly from Ms. Lan.

Importantly, the court did not dismiss the underlying civil claim outright. It did not decide that Ms. Lan could never be liable under a contract. That remained unresolved. The court also declined to determine whether a limitation defence would ultimately succeed, because the contractual terms and other relevant facts had not been settled. This was not a blanket exemption from debts connected with a former partner.

An illustration: one loan, two sets of obligations

Suppose a parent lends money to their adult child during that child's relationship. If the child alone is the borrower, a later family order requiring the child's former spouse to contribute toward the debt does not automatically let the parent collect from the former spouse. Conversely, if both partners are borrowers, an agreement between them assigning the debt to just one partner does not necessarily release the other from the lender's contract. This illustration is not a finding about the particular loan arrangements in Lan.

Records worth gathering before negotiating a settlement

• The original loan agreement, repayment terms and any guarantees.
• Bank transfers and messages explaining whether funds were a loan or a gift.
• Records identifying who agreed to borrow and who has made repayments.
• The exact wording of existing family orders and settlement proposals.
• Any lender's written agreement to a proposed release or change of borrower.

The practical lesson is to address both layers: the division of debt between spouses and any continuing obligations to the lender. A family settlement should not assume that a third party is bound by terms they have not accepted. Stokes Law LLP's family and civil practices can assist where separation issues and a creditor's claim intersect. This article provides general information; responsibility for a particular loan depends on the evidence, agreements and applicable law.