There is no financial situation as serious as one where a family deals with a shattered household due to separation and divorce. When a marriage ends, the broken family faces many new challenges: Children often split their week between two different homes, separated and divorced parents struggle to co-parent and learn how to budget with less money and more expenses.
Where there was once a single home to budget for now there are two separate homes and debt loads increase as a result. The financial pressures resulting from the payment of child support and spousal support from one parent to another further increase the financial stress. Over time, many of these divorced parents find themselves considering protection from the companies they owe money to and that means a meeting to discuss the filing of either a consumer proposal or a personal bankruptcy.
It’s not unusual for the parent receiving child or spousal support payments to discover their ex-spouse has filed for protection from his or her creditors. Luckily, the government took steps early on to prevent problems from cropping up in the insolvency process.
Yes, the Bankruptcy & Insolvency Act (the BIA) is designed to allow the “honest but unfortunate debtor a chance to have a fresh, debt-free start” by either filing a consumer proposal or filing for bankruptcy protection. But child support and spousal support are treated very differently under the BIA and cannot be dismissed like other debts (including income taxes, credit cards and loans) are. The legislation as it is written is designed to protect children and spousal support recipients and ensure those funds are paid as required by the ex-spouse.
That means spousal support and child support obligations cannot be excused through the filing of a personal bankruptcy or a consumer proposal. The government has even gone one step further to protect ex-spouses who receive spousal and child support (including arrears owing to them) from their former husband or wife. That means they get paid ahead of everyone else.
So if you get a package in the mail from the Trustee notifying you that your ex-spouse has filed a consumer proposal or a personal bankruptcy there is no need to worry. The filing will not affect your right to receive spousal support or child support owing to you and/or your children. Nor will a proposal or bankruptcy have any impact on your future right to receive such regular payments. In fact, by filing either a consumer proposal or bankruptcy, your ex-spouse may very well be dealing with less debt pressures then before the filing was made. This makes it more likely they will be able to successfully meet their support responsibilities to you and their children over time.