Bankruptcy Does Not Discharge Support Payments


Category: Personal Bankruptcy (4) 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

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