Divorce and Bankruptcy Law in Canada

Any aspect of family law can be confusing when you need to consider it beside bankruptcy.

This article has been designed as a starting point for looking at divorce and bankruptcy law in Canada.

Still, it’s always essential to get professional advice before you make any decisions.

That means talking with a licensed insolvency trustee.

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Alimony, Maintenance and Bankruptcy in Canada

First off, it’s important to be aware that bankruptcy doesn’t discharge responsibilities with regard to alimony or child support.

A spouse who is owed payments under this heading can make a claim to receive an appropriate portion of the bankruptcy estate – with preferred status for any arrears applying to the twelve months previous to the date of your personal bankruptcy.

That means the payments will be given priority over any unsecured debts.

Any balance remaining after that will still be considered owing by the person filing for bankruptcy.

Your Surplus Income During Bankruptcy and Alimony Payments

When your surplus income gets calculated during your bankruptcy, alimony payments are deductible – meaning they contribute to lowering any surplus payment you may be required to make before you can get discharged from bankruptcy.

The Timing of Your Divorce and Your Bankruptcy in Canada

Whether or not your divorce gets finalized before or after you file for bankruptcy is a factor in how many of your assets can be included in a divorce agreement.

Look at it like this – file before your divorce gets finalized, and all of your assets become part of your bankruptcy estate.

Those assets can no longer get considered for distribution according to any divorce settlement that you make.

On the other hand, if you finalize your divorce before you file for bankruptcy, any assets your spouse is entitled to under a Family Court order get transferred to him or her.

That means they don’t form part of your bankruptcy estate, so long as you act according to law.

Joint Debts and Bankruptcy in Canada

Divorce is irrelevant to bankruptcy when it comes to joint debts.

That’s to say, despite any divorce agreement, if you owed joint debts before your divorce, you still owe them afterwards.

When one of you files for bankruptcy, creditors can still chase your ex-spouse for repayments – and they usually will.

The only way you can eliminate joint debt is if the creditor concerned agrees to remove a cosigner – such as your spouse or ex-partner.

When you have joint debts – what can you do?

Both joint bankruptcies and joint consumer proposals often get used to deal with debts owed by couples – whether there are divorce proceedings involved or not.

You can undertake either of these two options, even after your divorce.

Both are feasible as ways to get out of debt when you separate, just the same as they would be when you were both still together.

Licensed Insolvency Trustees, Advice, Help, and Getting Out of Debt

The only way to get proper advice about whether either bankruptcy or a consumer proposal is right for you – or for you and your spouse – is to talk with a licensed insolvency trustee.

Trustees are the only professionals who can file for bankruptcy or a consumer proposal on your behalf.

They’re also a source of unbiased, expert advice.

Here at BankruptcyCanada, we’ve been assisting Canadian singles and couples with issues surrounding family law and insolvency for decades.

We have expert, friendly advisors waiting for your call on (877) 879-4770 (24/7).

If you’re unsure of the best way forward, or you are just losing sleep over debt – don’t delay and get in touch today.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

Gordon Sands

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