Bankruptcy Does Not Discharge Support Payments


Category: Personal Bankruptcy (10) comments

bankruptcy and support payments | child support | alimony
Filing bankruptcy does not discharge your obligation to pay court ordered alimony, spousal or child support payments. This includes both arrears and on-going payments.

Unlike other unsecured debts, arrears for court ordered child support or alimony are not discharged by either a bankruptcy or a consumer proposal in Canada.  The specific section of the Bankruptcy & Insolvency Act, section 178 (1)(b), states that

An order of discharge does not release the bankrupt from:

(b) any debt or liability for alimony;

(c) any debt or liability under a support, maintenance or affiliation order, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt;

What that means is that any amounts you owe for support prior to filing, will survive your bankruptcy and you will have to make those payments even after your bankruptcy is finished. In addition, you will be obligated to continue to make ongoing payments.

Filing bankruptcy (or a proposal) will also not stop the Family Responsibility Office from taking steps to garnishee your wages for support arrears, or even suspend your driver’s license for non-payment.

If your only debts are for court ordered support payments, there is no benefit to filing for bankruptcy.

What if I Have Support Arrears and Other Debts?

It is not unusual for family debts to cause financial difficulty after a divorce. The extra burden of running two households, on top of possible legal bills, can result in an unsecured debt burden that neither spouse is able to repay. Trying to balance debt payments with spousal or child support becomes a challenge in those circumstances.

If you are behind on your support payments because other debts are using up all of your monthly cash flow it may make sense to clear up your other debts to help you balance your budget. By eliminating your credit card or other unsecured debt, you will be in a stronger financial position to be able to meet your on-going (and any outstanding) support obligations.

It is also important to understand that your ex-spouse can file a ‘preferred’ claim in your bankruptcy for any outstanding support arrears arising out of the previous 12 months.

For more information on your situation, we recommend you talk to either your family law lawyer or a bankruptcy trustee.

Leave A Comment

  1. Terri

    My ex is a family lawyer who is undergoing some financial difficulties. Can he suspend or discontinue spousal support, even in a bankruptcy situation??

    Reply
    1. Ted Michalos

      If you are asking if he has a legal right to simply stop makign support payments, no, he does not, BUT there is very little anyone can do if he decides to stop making the payments, at least not quickly given that the Courts are closed. You could contact FRO if you are in Ontario and ask them to help, but it may take time given the current state of affairs. Of course if he doesn’t have any income coming in and no savings he may not be able to make the required payments. Let’s hope for everyone sake, yours and his, it doesn’t come to this…

      Reply
  2. C R

    my son has declared personal bankruptcy in 2019 (his first time doing so) and he’s been paying for the last 21 months (from September 2019 to May 2020. At the end of this, the bankruptcy company that he dealt with, told him that he still owes $10,000.00. How can this be if they set out the amount he should have been paying on a monthly basis.

    Reply
    1. J. Douglas Hoyes Post author

      Surplus income is calculated monthly, based on his income each month. He should ask his trustee for a detailed summary of his payments and all amounts owing, and then ask them to explain the calculation. If he is not satisfied with the explanation, he can request mediation as the next step in resolving this.

      Reply
  3. Ann

    My ex is threatening bankruptcy as he says he cannot pay the divorce settlement amount as per the court.
    In bankruptcy, will I have a claim as a creditor as per the family court judgement?
    He has assets in a holding company ie commercial real estate but unable to sell.

    Reply
    1. Ted Michalos

      I can’t give you a detailed answer without a lot more information, BUT bankruptcy does not eliminate support arrears, it does eliminate asset equalization payments. You can always go back to Family Court and ask the Court to review what has happened (ie your ex’s bankruptcy) and perhaps the Court will see fit to change your support Order… Definitely something to discuss with a Family Law lawyer. One common trick is to ask the Court to designate a portion of the equalization payment as “support” – then bankruptcy cannot eliminate all of it.

      Reply
  4. Destiny B.

    I am in the midst of a bankruptcy, and as per the signed separation agree and divorce judgment, my spousal support obligations are satisfied in June of this year, but I was told recently that I would need to continue to pay support (even though I have never missed a payment and will make every payment per the term in the judgement ) for the duration of the bankruptcy. Is this true?

    Reply
    1. J. Douglas Hoyes Post author

      Hi Destiny. Whether or not you are bankrupt does not impact the amount of support you are required to pay, so presumably, once you have paid the obligations as per the court order, your obligations are completed. The amount of support you pay does impact your surplus income obligations, so that may be what you are referring to. I would suggest you discuss this with your trustee who would have all of the information available to give you a specific answer.

      Reply
  5. Randi Smith

    Hello, My ex filed for bankrupcy a few years ago, but still owes me a lot of money for child support arrears. His bankrupcy trustee will be getting a lump sum of money from his mothers estate soon. I have read that child support arrears get paid first, but he says the CRA will get the majority of the money, as he is still making his bankrupcy payments. Can you please confirm who get paid first? Thank you

    Reply
    1. Ted Michalos

      Support arrears for the 12 months immediately preceding the date of bankruptcy are paid in priority to most other claims. Any other support arrears receive their proportional share of the money when it is paid out to the creditors. There’s no reason for CRA to get the money in priority to any other creditors. You should contact his trustee and ask them to explain what is going to happen directly to you – in that way they know you are looking for support arrears.

      Reply

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