When a marriage breaks down, the broken family unit often faces many new challenges. Where there are children involved, learning to co-parent with two separate homes, managing a household budget on less income and for many, managing debt repayment is a new skill that needs to be learned.
Sometimes, the debt load can be too much for an individual to handle and the assistance of a Licensed Insolvency Trustee may be helpful. This professional can help with eliminating the debt, or structuring the debt into one low monthly payment that is interest free.
But concerns may arise when the recipient of a child support payment or spousal support payment is caught by surprise when the payor has to file for Bankruptcy or makes a Consumer Proposal, and then suddenly the recipient gets notice of this because there are arrears owing.
The government put a system in place to allow the honest but unfortunate debtor a chance to have a fresh, debt-free start by either making a Consumer Proposal or filing for Bankruptcy. But the government also put some public policy systems in place to protect children and spousal support recipients.
Because of this public policy, spousal support and child support obligations cannot be forgiven through filing for Bankruptcy or a Consumer Proposal. The government has gone even one step further to protect the recipients: spousal and child support arrears to the extent of 12 months are paid out ahead of all other creditors.
f you receive a notice of a Consumer Proposal or a notice of Bankruptcy, you do not need to worry that it is going to affect your entitlement to receive spousal support or child support arrears. Nor will a proposal or Bankruptcy have any impact on your future entitlement to receive these payments. The Consumer Proposal or Bankruptcy will likely help the payor manage debt and expenses, and aid in the ability to meet these support obligations.