Guest post by Vanessa Park, family law lawyer,
Henderson Heinrichs LLP (Vancouver)*
The short answer is no. Bankruptcy does not release an obligation to pay child and/or spousal support under an agreement or court order. Section 178(1) of the Bankruptcy and Insolvency Act (the “BIA”) provides that an order of discharge does not release a bankrupt from:
- any debt or liability for alimony or alimentary pension; or
- any debt or liability arising under a judicial decision establishing affiliation or respecting support or maintenance, 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 May Change Is How Support Is Paid
However, if your former spouse or partner has an obligation to pay child and/or spousal support and he or she is discharged from bankruptcy, this could impact how support is paid to you.
Payment of Ongoing Support
Payment of ongoing child and/or spousal support should be unaffected by bankruptcy. Your former spouse or partner should continue making monthly support payments throughout the bankruptcy process and after discharge. The bankruptcy process is not a means for him or her to put a pause on payments or to avoid payment altogether.
Payment of Support Arrears
However, when it comes to payment of child and/or spousal support arrears or lump sum payments for support, you may not recover the full amount owed to you in the bankruptcy process.
When Support Was Payable Affects Whether Your Claim Is Preferred or Unsecured in Bankruptcy Proceedings
Under section 136(1)(d.1) of the BIA, monthly support that accrued in the year before the date of bankruptcy and any lump sum support that is payable are preferred claims. A preferred claim will be paid out in advance of ordinary unsecured claims but after secured claims. Having a preferred claim means that you have a better chance of recovering what you are owed.
Monthly support that accrued more than a year before the date of bankruptcy is an ordinary unsecured claim. An ordinary unsecured claim will be paid out after secured claims and then preferred claims. This means that your chance of recovering what you are owed is lower.
Discharge From Bankruptcy, Child / Spousal Support Arrears, and Lump Sum Payments for Support
While discharge from bankruptcy normally results in debts against the bankrupt being released, this is not the case for child and/or spousal support arrears or lump sum payments for support. Thus, if there is still money owing to you after discharge, your claim will continue to exist.
What to Do If You Think Your Former Spouse or Partner May File for Bankruptcy
If you believe that your former spouse or partner may file for bankruptcy, it is important to speak to a family law lawyer to ensure that your interests are protected. This is particularly true if you have not yet resolved the issues arising from your separation. For example, when it comes to lump sum payments for support, creditors in the bankruptcy process can challenge a separation agreement made just prior to bankruptcy. Further, if your separation agreement does not properly set out the amount owing as a support obligation, it may not survive the bankruptcy. These are only some of the issues where advice and representation by a family lawyer are invaluable to protect your future financial well-being.
Henderson Heinrichs LLP is an established family law firm with offices in Vancouver, BC and Edmonton, Alberta. 2017 marks the 20th year that our lawyers have been providing advice and representation to people experiencing the full range of legal issues that are associated with marriage, adoption, separation, and divorce. Visit our hhlaw.ca to learn more about our firm, our lawyers, and how we can help you.