Tag: bankruptcy and divorce

ONTARIO DIVORCE PAYMENTS AND BANKRUPTCY: OUR ESSENTIAL GUIDE ON THE RIGHT OF SET-OFF BETWEEN SPOUSES IN ONTARIO FAMILY LAW

Post author By Brandon Smith
Post date August 28, 2023

Introduction

Navigating the choppy waters of divorce is never easy. Apart from the emotional toll, there are intricate financial aspects that demand attention. One such aspect is the right of set-off between spouses, a concept that commonly surfaces in law, including the world of Ontario family law.

This Brandon’s Blog aims to shed light on the subtleties of the interplay between Ontario divorce settlements, equalization, spousal support obligations, child support, the right of set-off and bankruptcy. I explain and also explore a recent decision by the Ontario court that sheds light on the ins and outs around the payments to be made by the husband which the court allowed to be set off against court costs owed to him by his bankrupt wife.

Understanding Divorce Payments and Bankruptcy

The Ontario divorce process requires a huge selection of factors to consider, from equalization to support payments. Spouses find themselves not only unravelling the emotional strings but also coming to grips with the monetary details that bind them. When separation links up with bankruptcy, issues can end up being a lot more convoluted.

As a general policy, the Bankruptcy and Insolvency Act (Canada) (“BIA”) does not interfere with or generally influence spousal support or child support payments payable by one spouse to another, yet it does influence equalization. As described in the case below though, when you bring the concept of set-off rights into the mix, with or without a bankruptcy, support payments can be affected. Even in the case I describe below, the bankruptcy implications on support payments were not the reason for the impact of the court’s decision on it. It was the effect of the right of set-off.

The Right of Set-Off Explained

The right of set-off is a legal concept involving the negotiation of debts between two parties. Basically, it’s a mechanism that permits 2 people to offset common financial debts owed to each other, simplifying the cash element of the economic transaction. The right of set-off can play a role in Ontario family law cases also. It can help to simplify the tangled web of financial responsibilities that typically arise throughout divorce.

There are 2 types of set-off claims: (i) equitable set-off; and (ii) legal set-off. Equitable set-off hinges on fairness and equity, enabling one party to offset what they owe to the other based on what that other party owes to them. Legal set-off, also called statutory set-off, is backed by particular laws, supplying a structure for countering financial obligations. Both kinds of set-off are targeted at fostering equity as well as fairness during legal proceedings, including the divorce process.

Let’s dive deeper into the variables affecting the right of set-off as well as how it pertains to support payments and equalization claims.

Factors Influencing the Right of Set-Off

In the complicated landscape of divorce, not all debts are equal. The right of set-off includes different types of financial debts which can affect financial support and equalization payments. However, it’s necessary to acknowledge that not every financial responsibility can be subject to set-off. Understanding which financial obligations fall under the umbrella of set-off is vital.

Pre-existing agreements as well as court orders speak for themselves and have considerable weight if not the final word when it comes to set-off. If there are prior agreements or court orders pertaining to financial matters, these drive the applicability of set-off.

Additionally, in Ontario divorce proceedings, the financial interdependencies between spouses will be of the utmost importance. In cases where one spouse is owed support amounts while simultaneously owing a different financial debt to the other, the right of set-off can supply a system for balancing the financial scale, as we will see below. Parties can voluntarily enter into a set-off agreement in divorce.

Set-Off and Support Payments

Support amounts are where the right of set-off can enter. However, it is very important to note that not all amounts may be eligible for set-off. Lawful guidelines, especially in light of what is fair and equitable, and the unique situation of each case will influence whether set-off applies or not.

You will certainly see this play out in S. v. A., 2023 ONSC 4719 (CanLll) described below. Consulting an Ontario divorce lawyer can offer the necessary assistance to establish the applicability of set-off in your particular situation.

Set-Off and Equalization

The division of assets and debts during separation and divorce and property ownership issues in Ontario are dealt with through the process called equalization. This is how property division in divorce in Ontario is handled. This process aims to ensure that each spouse receives an equitable portion of the family property, irrespective of who earned or acquired it during the marriage.

The equalization payment, which is calculated by deducting the value of one spouse’s net family property from the other spouse’s on the date of separation, is generally paid by the spouse with the higher net family property to the spouse with the lower net family property. Equalization is a significant aspect of family law proceedings in Ontario, serving to provide financial stability and impartiality for both parties involved.

Think about a situation where a married couple jointly owns assets and the partner with the reduced net family property owes the other spouse money under either an agreement or court order (legal set-off). In such situations, the amount payable by the spouse with the greater amount can be countered against the debt owed to him or her by the other spouse to ensure a reasonable computation of the equalization claim. This enables a more just outcome, in what is otherwise a complicated process. This can also decrease the number of times they need to exchange cash.

The recent decision of the Ontario Superior Court of Justice in the case of S. v. A., 2023 ONSC 4719 (CanLll) described below, demonstrates how, based on those facts, the relationship between the bankruptcy estate, divorce, equalization, spousal and child support and also set-off can considerably influence the financial outcome of the divorce process. It’s critical to approach this element with a full understanding of the complexities involved. Getting legal advice from Ontario divorce legal counsel to help you navigate your divorce payment obligations and the right of set-off will help protect your financial interests.

Bankruptcy and divorce: Bankruptcy’s Impact on the Right of Set-Off

Clearly, there are enough legal complexities in divorce without layering on the federal bankruptcy law that largely does not interfere with provincial laws on divorce. Filing bankruptcy deals with the elimination of debt giving the person a fresh start. According to the BIA’s Section 97(3), the right of set-off applies to all claims against the estate and any lawsuits started or continued by the licensed insolvency trustee (formerly called a bankruptcy trustee). But there are a few exceptions like fraudulent preference or transfer under value proceedings.

When you get a divorce and you’re dealing with bankruptcy proceedings, things can get complicated. An area that always presents conflict in divorce proceedings coupled with when one of the spouses files for bankruptcy, is the area of joint debts.

Just because you’re getting divorced it doesn’t mean you don’t have to pay off any debts you took out together. You need to make sure you have a separate agreement for that, which can be very tough to negotiate and may end up not being fair to the spouse who is not insolvent. They may have to look to another aspect of their family law proceedings, legal separation agreement or their divorce agreement to get a measure of fairness back.

It’s a lot to handle when you’re going through a divorce. You definitely need to talk to an Ontario family law lawyer. And if you or your spouse need to file for a BIA insolvency process, such as a consumer proposal or personal bankruptcy, it might be worth it to get a bankruptcy lawyer too. Better safe than sorry especially when dealing with how bankruptcy can affect a divorce proceeding.

Recent Developments and Case Precedents

Ontario family law isn’t set in stone; it’s always changing. You have to stay up on the most up-to-date laws and court decisions to make sure you understand how the existing application works. Adjustments in laws and vital court decisions can have a large effect on how the right of set-off is interpreted and made use of.

Recent cases give us a sneak peek right into just how spouses can actually use the right of set-off in the real world. By looking at the recent decision which I will now describe, you can get a better grasp on exactly how it works. This case is an example we can learn from, showing us exactly how the courts deal with the right of set-off in a family law circumstance. So here we go!

S. v. A., 2023 ONSC 4719 (CanLll)

Factual background

Mr. S was owed about $729,000 (including interest) by Ms. A for court costs, but she hadn’t made any voluntary payments except for a small garnishment. Mr. S tried to have her bankruptcy annulled because he thought it was a misuse of the Canadian bankruptcy system. He wasn’t successful in that application.

Ms. A was entitled to 50% of the net sale proceeds and an extra $285,000 (which includes $75,000 in child support, $20,000 towards the childrens’ expenses (prior to their beginning to live with Mr. A.), and $115,000 equalization).

Full disclosure

Ms. A. consulted with us prior to her moving out of the matrimonial home and filing for bankruptcy. Of the many things we advised her of in our initial no-cost assessment, the most pertinent to this legal case were:

given the potential for the right of set-off being applied and section 178(1)(a) of the BIA, bankruptcy may not help her at all in avoiding the court costs order against her in the divorce proceedings; and
the sale price of the jointly-owned matrimonial home will be maximized if she cooperates with her husband and they sell the home together rather than her trustee in bankruptcy being a co-vendor.

She obviously did not like our advice as she told us that she did not wish to cooperate with her husband in the sale of the home and expressed frustration when we told her that bankruptcy may not help her achieve everything she wanted to. Nevertheless, she went ahead and filed for bankruptcy with a different licensed insolvency trustee. It turns out that the court agreed with our assessment of the situation!

Overview and decision

This is one of the many Ontario court decisions on set-off. In this case, it turns out that Ms. A was not acting in good faith during the five years after her split with Mr. S. The court decided to take the costs order against her of $677,610 plus additional costs and penalty of $47,000 she owes to Mr. S. and set-it off against some of what he had to pay in spousal support and equalization payments he owed her.

Ms. A. then filed an assignment in bankruptcy, mistakenly thinking that this would relieve her of this and other debts. As the jointly owned family home had not yet been sold, Mr. S and the Trustee worked together to sell the house. Ms. A. didn’t pay the property taxes or the mortgage for quite some time and those amounts owed had to be paid in order to complete the sale of the home.

Mr. S. was in divorce debt to Ms. A. and she owed him money for court-ordered costs against her arising from the same thing, being the divorce proceedings. The court ordered that Mr. A. could use set-off relief. The court granted this relief as it was fair. This is exactly how equitable set-off works.

Practical Tips and Recommendations

If you’re going through a divorce and dealing with financial problems too, here are some real-life tips to keep in mind:

Write everything down: Keep track of all your cash flow, support payments, and agreements. Trust me, when stuff hits the fan, you’ll be glad you have it all documented.
Be honest: Talk things out with your ex to avoid any misunderstandings or fights when it comes to money talks.
Get some help: Bring in a lawyer specializing in family law in Ontario to help you. You want to make sure you’re making the right decisions for you.
Plan ahead: Work with a financial person to see how your choices will affect you in the long run, especially if bankruptcy is looming for either you or your spouse. Be honest about the financial interdependencies between spouses.
Remember it’s not just about money: Divorce is a whole package deal, including legal, emotional, and financial. Take a step back and try to tackle it all in a well-rounded way.

Conclusion

If you’re attempting to navigate through all the hurdles provided by Ontario family law, divorce payments, and the chance of becoming insolvent, you have to learn about the right of set-off. It resembles a secret weapon that might simplify much of all the money dramatization between you and your ex. Whether you’re talking about support, equalization or both, the right of set-off can be essential to making things a little less complicated in a really difficult situation.

I hope you enjoyed this divorce, bankruptcy and set-off Brandon’s Blog. It is important for everyone to understand what constitutes set-off and how it may be important in Ontario family law proceedings. The cost of living for a separated couple living apart is more than a married couple living under the same roof. As life becomes more expensive for everyone, it is a growing concern in Canada, affecting individuals of all ages and income levels.

Individuals must take proactive measures to address financial difficulties and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind.

The Ira Smith Team understands these financial health concerns. More significantly, we know the requirements of the business owner or the individual who has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now!

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

Tags bankruptcy and divorce, Bankruptcy implications on support payments, Child support payments, Divorce and property ownership, Divorce legal counsel, Divorce settlements, Equitable set-off, Financial interdependencies between spouses, Legal complexities in divorce, Ontario court decisions on set-off, Ontario family law, Property division in divorce, Set-off agreement in divorce, Spousal support obligations, Statutory set-off

Brandon Blog Post

# VIDEO-DIVORCE DURING BANKRUPTCY CANADA WHICH COMES FIRST?

Post author By Brandon Smith
Post date October 26, 2016

The conundrum

Divorce during bankruptcy Canada is the same as the old conundrum, “which arrived first; the chicken or maybe the egg”, how would one answer, marital breakdown and insolvency: which comes first? Nobody has a definitive answer because excellent arguments can be produced for both. The same is true for “divorce and personal bankruptcy which comes first”?

Every case is decided based on its unique facts. Marital breakdown and insolvency, and bankruptcy and divorce, often go hand in hand. However, a marital breakdown will not always lead to divorce if the marriage can be salvaged. However, personal bankruptcy and divorce are two separate legal processes that can be at odds with each other.

A few indisputable facts

In this divorce during bankruptcy Canada Brandon’s Blog you will find 5 indisputable facts:

The number one reason for marital breakdown and divorce is financial issues. Divorce.com
In a recently available study one out of every seven people who made an insolvency filing in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
One-third of all people facing insolvency problems are also going through relationship breakdown and divorce in Ontario or {a splitting up. Gail Vaz-Oxlade
Bankruptcy won’t end all divorce financial obligations. e. g. It does indeed not end alimony or child support.
Declaring personal bankruptcy on joint debts, even debts in a divorce will impact the other debtor.

Are you looking to reduce grief?

If creating minimal interruption on the children of the family during a marital breakdown and personal bankruptcy features prime importance to the spouse with the debts (and presumably that will be just like the spouse making the support payments), it makes sense to have at least the support terms of the divorce decided, including the making of the support order and then do an insolvency filing. The marital breakdown and bankruptcy process will not disturb any in good faith arrangements for support, but keep in mind it will affect property not already dealt with by the family law court.

What about joint debts?

One particular area that comes up in divorce during bankruptcy Canada is this common question: “If my ex files how will it affect joint liabilities? “. Family law rules are the one area of a provincial law that is left relatively unblemished by the Bankruptcy and Insolvency Act, which is a federal statute. Nevertheless, the Supreme Court of Canada has confirmed that in Provinces that are an equalization jurisdiction (as opposed to a split of property jurisdiction, in a unanimous decision, the court upheld defining equalization payments as debts that are a claim provable in an insolvency process, meaning they are wiped off a person’s slate by the bankruptcy process.

Divorce during bankruptcy Canada: What should you do if you have both marital breakdown and too much debt?

Marital breakdown and bankruptcy is an extremely complicated process, made even more complicated when put together with divorce and requires a qualified licensed Trustee to work with your family law legal professional to work with your individual situation and give practical alternatives and an action plan. If you have serious debt problems, are considering bankruptcy and divorce, or perhaps wish to know more about marital breakdown and bankruptcy, then contact Ira Smith Trustee & Receiver Inc. as soon as possible. Starting Over, Starting Now, we can help you get your life back again on track, even with marital breakdown and personal bankruptcy looming.

Tags Bankruptcy, bankruptcy and divorce, Bankruptcy and Insolvency Act, bankruptcy process, debt problems, divorce, divorce and personal bankruptcy, divorce during bankruptcy canada, Ira Smith Trustee, marital breakdown, personal bankruptcy, personal bankruptcy and divorce

Brandon Blog Post

GTA VAUGHAN BANKRUPTCY TRUSTEE: BANKRUPTCY AND DIVORCE FINANCIAL SOLUTIONS

Post author By Brandon Smith
Post date August 29, 2016

Introduction to bankruptcy and divorce from a Vaughan licensed insolvency trustee (“GTA Vaughan bankruptcy trustee”)

As a GTA Vaughan bankruptcy trustee, I’ve never met anyone who had something good to say about bankruptcy and divorce. At times both are a necessary evil, but it’s never fun. Although divorce has been the butt of jokes by comedians for decades, it’s no laughing matter, especially financially.

This quote may be more telling than funny:

Let’s be blunt: If you hire a divorce lawyer today, there is a good chance you will hire a bankruptcy lawyer within two or three years.

Gene Meyer

GTA Vaughan bankruptcy trustee discusses debt issues and divorce financial solutions

When couples decide to divorce, few have any idea of what the split is really going to cost and what each party will be left with after the divorce. The goal of divorce and the divorce process and results are two very different things. Here’s the reality of most Canadians’ financial situations:

The debt-to-disposable income ratio was 165.3% for the first three months of 2016 (Statistics Canada)
Households owe $1.65 in debt for every dollar of disposable income they have (Statistics Canada)
Total household debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $1.933 trillion at the end of the first quarter (Statistics Canada)
Balances on consumer loans including credit cards and lines of credit grew by 2.6% year-over-year, driven primarily by the continued popularity of lines of credit and auto loans (RBC)
Mortgage loan balances were up 6.2% from the same quarter of the prior year (RBC)
The average Canadian owed $21,580 in non-mortgage debt during the most recent quarter (TransUnion)

Many Canadians are already teetering on the edge of financial disaster without throwing divorce into the mix. Even if you have an amicable divorce, the cost of an uncontested divorce ranges from $1,000 to $3,500, according to a 2015 Canadian Lawyer’s legal fees survey. If your divorce gets messy the fees can be astronomical. Living two separate lives costs a lot more than living together as a couple. Do you have a clear understanding of what your monthly expenses are? Do you have a budget? These are just some of the divorce financial solutions that as a Vaughan bankruptcy trustee we recommend to people that they have to know about it beforehand.

What can I do if I have too much debt – divorce or no divorce?

Whether you live in the GTA or elsewhere, take the advice of a GTA Vaughan bankruptcy trustee and get your financial house in order before you begin divorce proceedings or you may be looking at bankruptcy and divorce or bankruptcy alternatives down the road. Contact the Ira Smith Team for advice and a solid plan to deal with serious debt issues. We will give you a free first consultation to discuss your options and we can help you get out of debt Starting Over, Starting Now.

Tags Bankruptcy, bankruptcy alternatives, bankruptcy and divorce, budget, consumer credit, divorce, divorce financial solutions, gta bankruptcy trustee, gta vaughan bankruptcy trustee, household debt, Ira Smith Trustee, Lines of Credit, starting over starting now, Toronto bankruptcy trustee, trustee, vaughan bankruptcy trustee

Brandon Blog Post

BANKRUPTCY AND DIVORCE: NOT ALL REASONS TO GO BANKRUPT ARE GOOD

Post author By Brandon Smith
Post date September 15, 2015

Bankruptcy and divorce

Whenever we speak to groups about bankruptcy and divorce, and especially to grey divorce support groups, the same questions always arise regarding the interplay between the Federal Bankruptcy and Insolvency Act (BIA) and the Ontario family law provisions. I thought it would be best to address one such interesting issue in this week’s blog.

You may hate your soon-to-be ex, but the courts won’t allow you to use bankruptcy as a weapon against that spouse. Bankruptcy is legal proceeding involving an insolvent person or business that is unable to repay outstanding debts. It is not a way to avoid paying alimony or child support. There was a recent case that clearly demonstrates the court’s view on this very issue.

Blatherwick v Blatherwick

The case is Blatherwick v Blatherwick, 2015 ONSC 2606 (CanLII). The parties separated after 39 years of marriage. The wife was seeking spousal support and equalization, among other things. The husband disputed the amounts that the wife was seeking. The wife obtained a Mareva injunction which is a court order preventing a defendant from transferring assets until the outcome of the associated law suit is decided. However, the husband breached the Mareva injunction by declaring bankruptcy. And, to make matters worse he made false representations in bankruptcy, including the valuation of corporate assets and reporting of income. The husband thought that if he declared bankruptcy he would be putting his assets beyond the reach of his wife’s claim for equalization. (In a bona fide bankruptcy, it is true that an equalization claim is not a claim provable in the bankruptcy, unlike a claim for alimony and child support which cannot be extinguished as a result of a bankruptcy).

Unfortunately for Mr. Blatherwick, the intersection of bankruptcy and divorce does not work that way!

The Judge’s view on Mr. Blatherwick’s bankruptcy

The Judge stated:

“303 I find as a fact that Mr. Blatherwick made false statements which were significant in his Statement of Affairs.

304 I find as a fact that he made the assignment into bankruptcy to avoid making an equalization payment to Mrs. Blatherwick and to avoid his financial obligations arising from his voluntary disclosure to Revenue Canada.

305 I find as a fact that the purpose of Mr. Blatherwick going bankrupt was to obtain a collateral benefit in the matrimonial proceedings.

306 I conclude there was no bona fide financial reason for making a voluntary assignment into bankruptcy.”

Accordingly, the court annulled the bankruptcy. In the truest sense, it was as if the bankruptcy never happened at all. In this case, bankruptcy and divorce did could not be combined.

Summary

Trying to cheat the system by making false statements on your sworn statement of affairs to make yourself appear insolvent is never a good idea and can even lead to criminal charges. The bankruptcy can, as demonstrated in this case, be annulled.

If you are insolvent and are considering bankruptcy, contact Ira Smith Trustee & Receiver Inc. We offer sound advice and a solid plan for Starting Over, Starting Now so that you’ll be well on your way to a debt free life in no time.

Tags 2015 ONSC 2606 (CanLII), Bankruptcy, bankruptcy alternaties, bankruptcy and divorce, Bankruptcy and Insolvency Act, Blatherwick, Blatherwick v Blatherwick, Debt, divorce, equalization payment, grey divorce support groups, how to file bankruptcy in canada, information on bankruptcy, insolvent, Mareva injunction, Revenue Canada, starting over starting now, trustee

Brandon Blog Post

MARITAL BREAKDOWN AND BANKRUPTCY: WHICH COMES FIRST?

Post author By Brandon Smith
Post date August 13, 2013

Just like the old conundrum, “which came first; the chicken or the egg” how would one answer, marital breakdown and bankruptcy: which comes first? It has no definitive answer because excellent arguments can be made for both sides. The same holds true for “divorce and bankruptcy; which comes first”?

Each case has to be decided upon its own merit. Although marital breakdown and bankruptcy, and bankruptcy and divorce, often go hand in hand, marital breakdown doesn’t always lead to divorce if the marriage can be salvaged. As family and parental rights lawyers UT have made clear, bankruptcy and divorce are two separate legal processes that can be at odds with each other.

There are however a few indisputable facts:

The number one reason for marital breakdown and couples getting divorced is financial issues. Divorce.com
In a recent study one out of every seven people who declared bankruptcy in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
One-third of all people facing bankruptcy are there because they are also going through marital breakdown and divorce in Ontario or a separation. Gail Vaz-Oxlade
Bankruptcy doesn’t eliminate all divorce debts. E.g. It does not eliminate alimony or child support.
Declaring bankruptcy on joint debts, even debts in divorce, will impact the other borrower.

If causing the least disruption on the children of the family during a marital breakdown and bankruptcy is of prime importance to the spouse with the debts (and presumably that will be the same as the spouse making the support payments), it makes sense to have at least the support provisions of the divorce proceedings agreed upon, including the making of the support order and then file for bankruptcy. Marital breakdown and bankruptcy process will not disturb any bona fide arrangements for support, but keep in mind it will affect property not already dealt with by the family law court.

One such area comes up in this common question: “If my ex files for bankruptcy how will it affect joint accounts?”. Family law proceedings are the one area of provincial law that is left relatively untouched by the Bankruptcy and Insolvency Act, which is a federal statute. However, the Supreme Court of Canada has confirmed that in Provinces that are an equalization jurisdiction (as opposed to a division of property jurisdiction), in a unanimous decision, the court upheld defining equalization payments as debts that are a claim provable in bankruptcy, meaning they are wiped off a person’s slate by the bankruptcy process.

Marital breakdown and bankruptcy is an extremely complicated process, made even more complicated when combined with divorce and requires the expertise of a licensed Trustee to work with your family lawyer to assess your individual situation and provide practical solutions and an action plan. If you have serious debt problems, are contemplating bankruptcy and divorce, or just wish to know more about marital breakdown and bankruptcy, just in case, check out our bankruptcy faqs and then contact Ira Smith Trustee & Receiver Inc. as soon as possible. Starting Over, Starting Now we can help you get your life back on track, even with marital breakdown and bankruptcy looming. Watch for our next blog when we’ll be addressing more issues related to marital breakdown and bankruptcy, and divorce and bankruptcy.

Tags Bankruptcy, bankruptcy and divorce, Bankruptcy and Insolvency Act, bankruptcy faqs, Consumer Proposal, credit counselling, Debt, debt consolidation, debt relief, divorce, family law, if my ex files bankruptcy how will it affect joint accounts, if my ex files for bankruptcy how will it affect joint accounts, marital breakdown and bankruptcy, toronto bankruptcy, trustee, vaughan bankruptcy

Brandon Blog Post

I’ll fix my ex, I’ll go bankrupt – do bankruptcy and divorce work?

Post author By Brandon Smith
Post date February 26, 2013

“Ah, yes, divorce . . . from the Latin word meaning to rip out a man’s genitals through his wallet”. Robin Williams

Does bankruptcy and divorce together work?

The movies “War of the Roses” and “First Wives Club” were great comedies, but they were also sad commentaries on how down and dirty some divorces can really get. There seems to be no length that some people, mostly husbands, will go to in order to avoid paying or minimizing spousal support. Some of these divorce warriors would even declare bankruptcy in the mistaken belief that a bankruptcy and divorce in Canada will prove to the Family Court that with no assets and minimal if any income, they should be freed from the shackles of spousal support payments.

Declaring bankruptcy will not absolve you of spousal and child support. So for that purpose, bankruptcy and divorce don’t work together. In fact, the Bankruptcy and Insolvency Act defines support payments as one obligation that is not discharged by a bankruptcy and bankruptcy may make things worse. Family Courts tend to look at the bankrupt spouse as better able to keep current on their support payments now that they have been absolved of their debts. Bankruptcy legislation and the Bankruptcy Court tend not to interfere with or attempt to alter the normal outcome in Family Court. The only way to vary a support order is through the rules and procedures of the Family Court. So for this example, bankruptcy and divorce may hurt, not help.

Being an undischarged bankrupt will have no sway with the Family Court when it comes to support. The Family Court will look at the lifestyle the family enjoyed prior to the separation date and the income of the spouses prior to the bankruptcy date as being more indicative of the lifestyle to be enjoyed by the parties in the future. So again, bankruptcy and divorce doesn’t work hand-in-hand.

Bankruptcy and divorce will not remove your obligation to pay child or spousal support. In addition bankruptcy and divorce will not remove your obligation to pay any arrears that may have accumulated. Therefore, bankruptcy and divorce is not a quick fix or panacea to avoid Family Law support obligations. However, if you have other debts that are crushing you or you are insolvent, we can help. Contact Ira Smith Trustee & Receiver to tackle your financial problems Starting Over, Starting Now.

Tags Bankruptcy, bankruptcy and divorce, Bankruptcy and Insolvency Act, bankruptcy in Canada, Consumer Proposal, Family Court, spousal support