How does bankruptcy affect on-going child and spousal support in separation and divorce?
One of the key aspects of support payments is that they are generally considered non-dischargeable debts. This means that even if an individual is declared bankrupt, they are still legally obligated to continue making support payments.
The Bankruptcy and Insolvency Act gives special consideration to child support payments, and treats them like a “secured debt”.
It is important that there’s a written agreement or court order solidifying the amount(s) owing for it to survive the bankruptcy.
How does bankruptcy affect arrears of support?
Arrears of support is also called “backpay”.
If there are overdue support payments (arrears) at the time of bankruptcy, those amounts are also considered non-dischargeable. While the individual may receive relief from other debts, they must still make arrangements to pay any outstanding support arrears.
How does bankruptcy affect costs awards?
Costs awards are legal expenses that may be ordered by a court to be paid by one party to another.
In bankruptcy, if the costs award relates to spousal support or child support, then it will survive the bankruptcy claim
If the costs award relates to property division, then the award will get discharged.
If the costs award relates partly to property division and partly to support, then the parties either need to agree or have the court order how much of the award relates to which topic.
How does bankruptcy affect property division?
During separation or divorce, couples typically divide their assets and liabilities. If one spouse files for bankruptcy before the property division is finalized, it may affect how assets are divided.
The bankruptcy discharge may protect certain assets from creditors, but it does not exempt assets acquired by the couple during the marriage. Courts will take the bankruptcy into account when determining a fair distribution of property.
If one spouse declares bankruptcy, it does not automatically absolve the other of responsibility for shared debts. The divorced spouse may still be held accountable for certain joint debts, so it’s essential to clarify these obligations during divorce proceedings.
What should a person do if their former spouse declares bankruptcy?
First thing to do is to contact the trustee handling the bankruptcy to ensure that they know about the child support, spousal support, or costs awards owing. They can direct you from there. You’ll have to submit your paperwork to them.