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.