How Bankruptcy Impacts Child Support, Spousal Support, and Costs in Family Law Cases
By Matthew Katsionis, Sr. Family Lawyer, Vancouver
As family lawyers, we sometimes encounter questions about the impact of bankruptcy on child support, spousal support, and cost awards in family law matters. In this blog, we delve into these concerns and provide clarity on how bankruptcy can affect these financial obligations in British Columbia.
How does Bankruptcy Effect Child Support Obligations?
In British Columbia, filing for bankruptcy can affect child support obligations in several ways.
- As in other jurisdictions, child support is considered a priority debt that cannot be discharged through bankruptcy. This means that even if the debtor (the person who declared bankruptcy) files for bankruptcy, they are still required to pay their child support obligations.
- In British Columbia, the Family Maintenance Enforcement Program (FMEP) is responsible for enforcing child support orders. If a debtor files for bankruptcy, the FMEP will continue to pursue the debtor for any outstanding child support payments. The FMEP has the authority to garnish the debtor's wages (withhold income directly from their employer), freeze their bank accounts, or even seize their assets to collect any outstanding child support payments.
- If the debtor owes arrears on their child support payments, they may be able to include these arrears in their bankruptcy filing. In a bankruptcy proceeding, child support arrears are considered a secured debt, which means that they are given priority over other unsecured debts. The debtor may be able to include the arrears in their payment plan and pay them off over a period of time.
It is important to note that filing for bankruptcy does not eliminate or reduce ongoing child support obligations. Therefore, even if the debtor is able to discharge some of their other debts through bankruptcy, they must continue to pay their ongoing child support obligations in full and on time. Failure to do so can result in legal consequences such as wage garnishment, liens, and even jail time.
What is the impact of bankruptcy on spousal support obligations?
Spousal support obligations are treated similarly to child support obligations, as they are also classified as priority debts that cannot be discharged through bankruptcy.
Do child support arrears or spousal support arrears go away if someone declares bankruptcy?
In short, no. Child support arrears and spousal support arrears are given special consideration under the Bankruptcy and Insolvency Act (the law that governs bankruptcy, specifically). Generally, for the arrears to be unaffected, there needs to be a court order or agreement pre-dating the bankruptcy in order to protect the arrears.
What could occur is that the security for child support such as assets of the debtor cannot be used as further security for the debt owed for the child support and/or spousal support arrears.
What I can do if my former spouse declares bankruptcy?
If your former partner ends up deciding to declare bankruptcy, you can reach out to the trustee of the bankruptcy to become a priority creditor. You will need to prove that you have an agreement and/or court order to prove that support is owed.
Do cost awards in court become discharged in a bankruptcy?
The answer to this question can be surprising, as it is both yes and no. If the cost award is related specifically to property related issues in a family law case, then the cost awards do get discharged. What this means is that you cannot collect those cost awards.
If the cost award is related to child support and/or spousal support, then the cost awards survive the bankruptcy and remain a debt that is owed.
If your matter has an award for costs but there are various issues in your family law case such as both property and child support issues, then you either have to (a) agree with your former spouse as to what percentage of costs is attributable to which claims, or (b) appear before the judge who made the award to get a determination as to the percentage that is applicable to each issue. The percentage associated with the child support and/or spousal support claims will survive the bankruptcy.
Bankruptcy can impact child support, spousal support, and cost awards in family law cases in various ways. It is crucial to understand the implications of bankruptcy and take appropriate steps to protect your financial future. The family lawyers at Crossroads Law are well versed in this area of the law and can help you navigate complicated scenarios such as this. Contact us today to book your free 20-minute consultation.