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EQUALIZATION PAYMENT DIVORCE ONTARIO: THE BASIC RULE FOR MARITAL PROPERTY AND BANKRUPTCY

equalization payment
equalization payment

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click on the podcast.

Bankruptcy and divorce: Equalization payment introduction

The pandemic has taken a toll on couples both financially and psychologically, which has actually triggered many to consider going for separation and maybe even filing for bankruptcy. This is not to say that every bankruptcy causes a subsequent divorce, or that every separation will certainly necessitate the declaring of bankruptcy.

In my Brandon Blog dated March 2, 2020, titled “DIVORCE DEBT: NOT ALL EQUALIZATION ISSUES ARE EQUAL IN BANKRUPTCY” I described a decision of the Ontario Superior Court of Justice (Commercial List) where the court decided that the claim for an equalization payment is “personal as between the spouses” and cannot be started by the licensed insolvency trustee. However, if the claim was already started by the spouse prior to his or her bankruptcy assignment, then it is a claim for property that the Trustee can continue to advance.

I thought that was the end of the matter, but apparently not. The bankruptcy trustee, who could have left well enough alone, did not. The trustee in bankruptcy appealed the court’s decision to the Court of Appeal for Ontario. Recently, the three-judge panel released their decision of the appeal that was heard last November.

In this Brandon Blog, I discuss this recent Court of Appeal for Ontario decision dealing with an equalization payment, marital property, divorce and bankruptcy in Ontario.

Bankruptcy and property: Insolvency 101 on what happens to property in a personal bankruptcy

It is a fact that when someone files for personal bankruptcy, the bankruptcy provisions states that all of their property vests in the licensed insolvency trustee administering the file. There is a discrete list of assets set by every province in Canada that is exempt from seizure and therefore cannot be sold by the Trustee. Technically, the licensed insolvency trustee gives back to the bankrupt that property. In practical terms, the Trustee never seizes it. But whenever the topic of bankruptcy under federal bankruptcy laws gets mixed in with the Ontario Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), the discussion on matters about bankruptcy always starts to get murky.

A claim for an equalization payment by one spouse against the other in Ontario family law proceedings meets the definition of property. So if the spouse entitled to the equalization payment files an assignment in bankruptcy, that entitlement is their property which now vests in their licensed insolvency trustee. When collected upon, it is available to the bankruptcy estate and its creditors. However, what if that spouse has yet to make the equalization payment claim and goes bankrupt? Does the Trustee have the right to assert that claim?

What are equalization payments in divorce?

In Canada, each province sets their own family law statutes. When it comes to family property and divorce, there are two different possibilities in Canada. The province can elect for those divorcing spouses to have to split their property equally. This would make them a division of property province under family law.

Alternatively, rather than looking for a division of assets, the province can mandate that each spouse calculate their respective net family property. Then the spouse with the higher net family property value has to either pay money or transfer property to the other spouse so that they end up being equal. Hence the money that would be paid over from one spouse to another is called the equalization payment. This is what happens in Ontario. Ontario is not a property division province but rather is an equalization jurisdiction.

The application for equalization and the equalization payment is totally separate from the claim for and determination of spousal support and child support to the other. The equalization claim falls into the category of non-support-related spousal claims.

equalization payment
equalization payment

Rusinek & Associates v. Arachchilage & Baliah, 2020 ONSC 1090 (CanLII)

In my March 2020 blog referred to above, I described this Ontario family law case combined with the insolvency situation of bankruptcy. You can certainly read it if you want all the details. However, the bottom line of that decision is that under the FLA, the post-separation equalization claim is “personal as between the spouses”.

This means that if a spouse who subsequently becomes bankrupt had not yet made that claim, his or her Trustee cannot start the claim for the determination of equalization on the basis that the claim is a property that vests in the Trustee. However, if the claim had already been made and the equalization process litigation has already begun, and then that spouse becomes bankrupt, the Trustee does take over the right to advance that litigation against the non-bankrupt spouse for the equalization payment which stands in lieu of property rights. Whatever payment comes from it goes to the Trustee for the general benefit of the creditors.

Bankruptcy and equalization payments: Court of Appeal for Ontario says the timing of the bankruptcy matters

From what I have told you so far, you can see that the timing of the person’s voluntary assignment into bankruptcy or the Bankruptcy Order being made (from the filing of a Bankruptcy Application) does matter. For the trustee in bankruptcy to be able to assert that equalization payment claim, the bankrupt spouse had to have already made that claim prior to becoming bankrupt.

The Court of Appeal for Ontario considered the Trustee’s appeal of this lower court decision. It considered the laws around bankruptcy and the FLA and dismissed the appeal. I will now tell you why.

The Court of Appeal stated that a spouse’s claim for equalization becomes property of the bankrupt if that same spouse then declares bankruptcy. The action vests in the trustee in bankruptcy and the Trustee has control over the claim together with the right to get any unpaid equalization payment.

There is no restriction in the Bankruptcy and Insolvency Act (BIA), under the FLA or in the common law, preventing the trustee in bankruptcy from going after it after the now-bankrupt spouse had already started that part of the Family Law litigation.

[NOTE: This bracketed portion is not part of the case heard by the Appeal Court, but this is the appropriate place to share this information with you. I think it is obvious that the bankrupt spouse would not start the equalization claim litigation while being an undischarged bankrupt. Otherwise, the Trustee would be entitled to the proceeds.

Also, presumably, the bankrupt spouse might do better if the non-bankrupt spouse only paid support instead of both support and equalization. I would advise the bankrupt’s family law lawyer to not make an equalization claim, and in return, negotiate for a larger support claim, in lieu of both.

A Trustee cannot directly attach to a support claim. The Trustee would just have to assess that information, along with whatever other income the bankrupt spouse has, to determine if there is any surplus income obligation.]

The Court then went through a thoughtful analysis of whether the entitlement to equalization can be initiated by the licensed insolvency trustee. The Court of Appeal concluded that because the action for equalization is “personal as between the spouses”, only spouses can bring claims for equalization. The Trustee cannot.

It is for these reasons that the Court of Appeal for Ontario confirmed the lower court decision, dismissed the Trustee’s appeal and awarded costs of $10,000 against the Trustee in favour of the non-bankrupt spouse respondent.

I will now go on to provide you with some extra information about divorce proceedings and bankruptcy.

equalization payment
equalization payment

How does an unpaid equalization payment intersect with bankruptcy?

In a bankruptcy, if the non-bankrupt spouse still owes the bankrupt spouse an unpaid equalization payment, the bankruptcy plays no part. That spouse still has to make the payment. Only now, it has to be made to the Trustee.

However, if the spouse who files for bankruptcy owes the non-bankrupt spouse an unpaid equalization payment, that liability is caught in the bankruptcy. The non-bankrupt spouse has a provable ordinary unsecured claim in the bankruptcy of the spouse. As stated above, the bankrupt spouse no longer has to make the equalization payment because it is an unsecured debt and will be discharged from that person’s discharge from bankruptcy.

What happens to spousal and child support payments during bankruptcy? Nothing. Any liability for support, either spousal support or child support, is not eliminated by filing bankruptcy. The bankrupt spouse still has to make those payments. Just like any other spouse, if the bankrupt spouse does not make the support payments, the spouse that is entitled to receive support can obtain collection assistance from the Ontario Family Responsibility Office.

What happens to joint debt if you file for bankruptcy?

Joint debt in a divorce is hard enough to sort out. Layer a bankruptcy on top of that and things may become much clearer, but also potentially unfair. When you file for bankruptcy and have joint debt, it is important to know what happens to the debt. The most common type of joint debt couples share is from joint credit cards. Next would be if one spouse co-signed for or otherwise guaranteed the debts of the other spouse. Other common examples are joint mortgages and joint lines of credit.

A creditor can collect the debt from both you and your co-signer, but in your bankruptcy, the law does not protect your non-bankrupt co-signer from your joint debt. If you file for bankruptcy, your creditors can still come after your co-signer for the debt.

If your estranged spouse is considering bankruptcy as a last-ditch effort to eliminate their overwhelming unsecured debt, it could spell trouble for you if they file for bankruptcy. When they file for bankruptcy, they are trying to erase their unsecured debt. Unfortunately, you will be saddled with the sole responsibility to repay those joint debts. You will have to try as best you can to be protected financially through the divorce process.

You need to decide how you will deal with these debts that your spouse won’t have to pay because of their bankruptcy. If you cannot afford to pay them on your own, in addition to your other living expenses, you may have to consider either bankruptcy or a consumer proposal as an option to save you from this catastrophe.

Are the bankruptcy rules fair, especially given the discussion above about the equalization payment? The BIA is the set of regulations and rules that govern a bankruptcy or insolvency in Canada. The BIA governs both people and companies that have come to be incapable to pay their financial debts. It handles the regulations for the time duration both leading up to insolvency and the declaring of bankruptcy.

The policies established by the BIA have a substantial impact on the lives of debtors and creditors. They are extremely crucial for the survival of the business or person. The rules are fair for everyone. But the effect they have on different stakeholders in an insolvency file may not be very fair.

equalization payment
equalization payment

Equalization payment and Ontario divorce and bankruptcy summary

I hope you enjoyed the equalization payment Brandon Blog post. You may be very frustrated and angry over your marital and financial situations. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

There may be sufficient value to take care of the secured creditor, but nothing for anyone else, including the unsecured creditors. There may be some business units that should not survive, but if cut out, the business will be viable. A receivership might very well accomplish the goals for the entrepreneur also. I have many times structured a receivership process, in order to meet the goals of the entrepreneur, while satisfying the requirements of the secured creditor.

Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

equalization payment

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DIVORCE DEBT: NOT ALL EQUALIZATION ISSUES OR RULES ARE EQUAL IN BANKRUPTCY

divorce debt
divorce debt

If you would prefer to listen to an audio version of this divorce debt Brandon’s Blog, please scroll to the bottom of this page and click on the podcast.

Divorce debt and bankruptcy introduction

The topic of divorce debt and bankruptcy is always a tricky topic. There are 6 indisputable facts when it comes to this topic:

  1. The primary reason for marital failure and also separation is financial issues. Divorce.com
  2. Research shows that one out of every seven people who made an insolvency filing in Canada detailed separation, marital breakdown and/or divorce debt as a contributing variable to their economic troubles.
  3. One-third of all people facing bankruptcy issues are likewise experiencing a family breakdown and divorce.
  4. Bankruptcy won’t end all separation responsibilities. e. g. It does not end spousal support or child support.
  5. Personal bankruptcy of one of the spouses, where certain divorce debts are joint, the bankruptcy, notwithstanding the divorce, will negatively affect the non-bankrupt spouse.

With really only one exception, bankruptcy law in Canada has been purposely designed not to interfere with the administration of provincial family law proceedings.

The only exception to this in Ontario is that an equalization payment is an unsecured divorce debt from one spouse to the other. If the spouse who has to make the equalization payment goes bankrupt during or after the divorce proceedings, then that debt is a debt caught by the bankruptcy. The spouse entitled to receive the equalization payment will have a provable claim in the bankruptcy for at least that amount. This does not apply to support payments.

The purpose of this Brandon’s Blog is to review a recent Ontario court decision released on February 19, 2020, that determines the answer to the question: can a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) begin an equalization claim against the non-bankrupt spouse under the Ontario Family Law Act, R.S.O. 1990, c. F.3 (“FLA”).

Divorce debt: The facts

The facts of the case were not in dispute. They are:

  1. The husband and wife purchased a house in Toronto where they resided.
  2. The matrimonial home was bought solely in the wife’s name.
  3. The spouses separated in February 2015.
  4. He left the marital residence in October 2015 and has never returned.
  5. There is no disagreement that there the issues facing the husband and wife are irreconcilable, that the separation will be permanent and that the parties wish a divorce.
  6. Neither the husband nor the wife had commenced an application for an equalization of the net family property prior to the husband filing an assignment in bankruptcy. It was not a divorce debt claim that he made. The husband remains an undischarged bankrupt. His sworn statement of affairs shows liabilities totalling $282,700.
  7. The wife deposed that she paid the deposit and all other amounts to buy the marital residence. She also stated that in addition, she paid the mortgage, taxes, and all other expenses associated with the home.
  8. The separation and divorce proceedings began due to his gambling addiction and his financial infidelity and other forms of infidelity.
  9. Her affidavit sets out that there was never any intention that the husband would have any interest in the matrimonial house.

If the trustee is successful in asserting an equalization claim then she and her kids aged 12 and 15 would be forced to leave the home as it would have to be put up for sale in order to raise the necessary funds to pay the equalization claim.

divorce debt
divorce debt

Equalization in Ontario, divorce debt and bankruptcy

Trustees have various rights under the Bankruptcy and Insolvency Act (Canada) (BIA). One of those rights is to have the benefit of laws dealing with property in the BIA. There is no dispute that the marital home falls under the definition of property. There is also no dispute that if the husband had begun an equalization claim of divorce debt before his bankruptcy, the Trustee would have the right to continue that claim.

Under the FLA, where spouses are separated without any possibility of reconciliation, the FLA qualifies the partner with the lesser of the spouses’ two net family property to one-half of the difference between them. If the trustee is permitted to make a case for equalization and is successful, then his share of the marital residence assets (based on any applicable reductions or offsets) would be included as an asset in his bankruptcy estate.

There is no disagreement that equalization claim is a divorce debt chose in action that a Trustee inherits upon the bankruptcy of the spouse who started that action. The question is, can a Trustee, standing in the shoes of the bankrupt spouse who has not yet started that action, start it?

There are many cases dealing with valid scenarios in which an equalization claim had already been started. The applicant Trustee’s position is that the Trustee has the capability to begin a claim for equalization of the net family property where neither partner has made such a case. The Trustee is relying on the fact that an equalization claim is a chose in action which the Trustee inherits.

The Judge’s decision

The Judge disagreed with the Trustee’s position. The court held that while the decision to continue with the divorce debt equalization claim made by the spouse can be left to a stranger to the marriage, the decision itself to make the claim cannot. So the Trustee can continue the decision of the spouse to make a formerly begun equalization claim however the choice to make the claim may not be made by anyone other than the spouse. That decision continues to be personal as between the spouses.

The Judge dismissed the Trustee’s motion and ordered the Trustee to pay $20,000 in costs to the wife immediately.

divorce debt
divorce debt

Summary

I am not aware of that question ever having been asked and decided by the Court before. So for now, in Ontario, that is the answer to that kind of divorce debt question. Do you have too much debt because of marital breakdown or for some other reason? Does your company have excessive debt and in need of debt restructuring? Would it not be great if you could do a turn-around?

The Ira Smith team is available to help you at any time. 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. For more information on a no-cost basis please call us.

The Ira Smith Team understands how to do a debt restructuring. More notably, we comprehend the requirements of the business owner or the person who has too much individual debt. Because you are dealing with these stressful financial issues, you are anxious.

It is not your fault you can’t fix this problem on your own. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

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.

We understand 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 get you or your business back on the roadway to healthy and balanced worry-free operations and end the pain points in your life, Starting Over, Starting Now.

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PRENUPTIAL AGREEMENTS MAKE FAMILIES STRONGER: THEY AREN’T JUST FOR THE RICH & FAMOUS – PRENUPS IN ONTARIO ARE FOR YOU TOO

prenuptial agreements make families stronger prenups in ontarioPrenuptial agreements make families stronger: Introduction

Every time we hear about another celebrity divorce, there’s talk about their prenup. But prenups are not new, nor are they only for the rich and famous. In fact, prenups have been around for thousands of years and historians believe they were first used in ancient Egypt. Prenuptial agreements make families stronger by hopefully, stating clearly what happens if divorce occurs.

The reality is that with the divorce rate as high as it is (over 40% in Canada and over 50% in the U.S.) prenups make good financial sense for everyone. I know it’s not romantic to plan for when divorce or death happen, but should the worst happen, you’ll be prepared and protected. In this blog, we focus on married couples, but keep in mind most of this applies to people living in a cohabitation arrangement too. We are not lawyers and this blog is not meant to give legal advice. We recommend you seek the advice of an experienced family law lawyer in dealing with any situation.

Prenuptial agreements make families stronger: Prenuptial agreements definition

What is a prenup? A prenup, or prenuptial agreement, is a legal agreement entered into before marriage. It establishes the financial and property rights of each spouse if divorce or death happens.

Prenuptial agreements make families stronger: Why prenups in Ontario?

Why should I get a prenup? As we discussed in our earlier blog, very few couples have had serious discussions about their finances before getting married. Many were not aware of the other’s debts or what their soon-to-be-spouse earned.

Even if you’ve avoided the discussion until now, a prenup will put everything on the table. It legally requires both parties to show all of their assets (including any debt) and will help you formalize your plans for the future. A prenup gives you control instead of the courts “just in case”.

Prenuptial agreements make families stronger: The practical reasons

There are many practical reasons why you should get a prenup. If divorce or death happens it can:

  1. Make sure that the divorce doesn’t turn into a war zone that takes no prisoners
  2. Prevent a long drawn out legal battle
  3. Protect spouses from each other’s debts
  4. Dictate how one spouse’s property can be passed on to children from a previous marriage
  5. Indicate whether one of the parties is to receive alimony
  6. Ensure that upon your death that your assets are distributed according to your wishes
  7. Prevent your spouse from owning a part of your business
  8. Decide who gets custody of the dog, cat or other pets

Prenuptial agreements make families stronger: Don’t be destroyed financially

Prenuptial agreements make families stronger: they aren’t just for the rich and famous – prenups in Ontario are for you too! They can protect you from the financial ravages of divorce.

We’ve seen many couples destroyed financially due to divorce and we could help them get back on track. The Ira Smith Team can help you too. Give us a call today and Starting Over, Starting Now we can set you on a path to debt free living.

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# VIDEO-DIVORCE DURING BANKRUPTCY CANADA WHICH COMES FIRST?

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:

  1. The number one reason for marital breakdown and divorce is financial issues. Divorce.com
  2. 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.
  3. 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
  4. Bankruptcy won’t end all divorce financial obligations. e. g. It does indeed not end alimony or child support.
  5. 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.

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GTA VAUGHAN BANKRUPTCY TRUSTEE: BANKRUPTCY AND DIVORCE FINANCIAL SOLUTIONS

gta vaughan bankruptcy trusteeIntroduction 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.

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

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

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FINANCIAL INFIDELITY IN MARRIAGE LEADS TO DIVORCE

FINANCIAL INFIDELITY IN MARRIAGE LEADS TO DIVORCE

Financial infidelity in marriage: Introduction

Financial infidelity in marriage is a recurring problem. Couples heading to divorce argue about many things – the kids, sex, in-laws, the house, division of labour – but a study from Utah State University and recent statistical findings from online divorce service MyDivorcePapers.com (MDP) have re-confirmed that the cause of money, not sex, is the top predictor of divorce. The study and the data show that couples who engage in financial infidelity in marriage routinely argue about their finances are setting a steady course for divorce. Many studies echo these findings, including a 2012 longitudinal study that found that money is the number one cause of tension in relationships and as a result, it’s also the top predictor of divorce.

Financial infidelity in marriage: Our definition

Financial infidelity in marriage occurs when a spouse commits to serious spending that affects the entire household without first consulting their mate. To avoid becoming a statistic couples should be doing a lot of talking about finances before saying I Do and throughout the marriage. It may not be romantic but avoiding the conversation may doom your relationship to failure. You are no doubt discussing your compatibility in many areas of life. You are more than likely not discussing your financial compatibility. The likelihood of financial infidelity in marriage may be increased as a result.

Financial infidelity in marriage: Some important considerations

Have you considered:

  • How you’re planning to pay for your lifestyle?
  • Saving for retirement?
  • If your spending habits are compatible?
  • What your financial priorities are?
  • Your assets?
  • Your debts?
  • A prenup?

Financial discussions need to be frank and transparent. The health of your marriage may depend on your financial health. If in the course of your financial discussions you uncover serious debt issues, it’s better to deal with the debt sooner than later.; stay away from divorce by not committing financial infidelity in marriage.

Financial infidelity in marriage: We can help you

Start your life off debt free and with a go forward plan to stay that way. For sound professional help and advice contact Ira Smith Trustee & Receiver Inc. today. We can’t guarantee you a happy marriage but Starting Over, Starting Now we can help you deal with serious debt issues and put you on a path to living a debt free life.

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Brandon Blog Post

IF MY EX DECLARES BANKRUPTCY, HOW WILL IT AFFECT ME?

joint accounts, divorce, bankruptcy, bankruptcy process, bankruptcy and insolvency act, debt, trustee, divorce and bankruptcy,ex declares bankruptcyIn last week’s blog we talked about Divorce And Bankruptcy – Which Comes First? Sadly, divorce and bankruptcy are indelibly intertwined. The number one reason couples get divorced is financial issues and 1/3 of all people in Ontario facing bankruptcy are there because they are also going through a divorce or a separation. The issue of divorce and bankruptcy is a potential minefield and there are many issues that can arise if you are already divorced and your ex declares bankruptcy.

Will I still owe for debts and credit cards that I co-signed with my ex? Unfortunately, yes. You will be held responsible for any debts that you did sign for. In fact after your ex files for bankruptcy he/she will no longer be responsible for the debts, but the debts for any loans and credit cards will be 100% yours.

My divorce decree assigned the debts to my ex, so why are the creditors coming after me for payment? A divorce decree is a legally binding agreement between you and your ex but it in no way binds any creditors. If you’re a co-signor with your ex on a debt acquired while married, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the full debt to your ex.

Will my ex’s bankruptcy affect my credit score? Your ex’s bankruptcy process can affect your credit score if:

  • You and your ex still have joint accounts
  • You are now responsible for debts that you co-signed for

What will happen to my alimony and child support? The good news is that any support – alimony or child support is non-dischargeable (the debt can’t be eliminated) in bankruptcy by the Bankruptcy and Insolvency Act. However, as a result of the bankruptcy process, if your ex is having trouble in making these payments in full and on time, there will be an obvious affect.

If you’re experiencing serious debt problems, contact Ira Smith Trustee & Receiver Inc. as soon as possible. There is help available and Starting Over, Starting Now we can help you to live a life that is not consumed by financial stress.

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Brandon Blog Post

MARITAL BREAKDOWN AND BANKRUPTCY: WHICH COMES FIRST?

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 bankruptcyJust 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.

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