Kitchener Ontario Personal Bankruptcy Blog: May 2006: Answers to Personal Bankruptcy Questions

Posted on Wednesday, May 10, 2006

Bankruptcy and divorce equalization payment

Question received: I have an equalization payment owed to me. My spouse claims he will be filing bankruptcy and wants to pay the lump sum over 3 years.
Will my equalization owing be included in the bankruptcy?

Answer: Yes, if your ex-husband is obligated to make an equalization payment that has been ordered prior to him filing bankruptcy, then you become a creditor in the bankruptcy. The bankrupt husband's assets are no longer accessible to enforce a claim for equalization, as the assets vest with the trustee. If he is able to obtain a discharge from bankruptcy, then the equalization payment is discharged with the other debts.

Equalization, support and maintenance payments are governed in Kitchener-Waterloo, Ontario, by the Family Law Act. We are only giving you a very general answer; there are many different situations and orders, so we strongly encourage you to confirm the details with your legal counsel.

The Bankruptcy and Insolvency Act does provided for special treatment of debts that are for family support and maintenance. To discuss your situation in detail, please call our Kitchener office at 519 747-0660 or 310-PLAN.

Posted on Tuesday, May 09, 2006

What debts are not "cleared" through a Bankruptcy or Proposal?

Debts can arise from many different sources - credit cards, loans, taxes, lawsuits, government overpayments, support payments, etc. When people reach a point when these debts are no longer manageable, they have the option of a personal bankruptcy or a consumer proposal. But what debts are included and not included?

In general, the Bankruptcy and Insolvency Act states that all debts are discharged or cleared through a personal bankruptcy or a consumer proposal except for the following:

- Federal or Provincial student loans that are under 10 years old, from the time ceased to be a full or part-time student;
- some debts with respect to support or maintenance under Family Law;
- a debt or liability arising from fraud, embezzlement, misappropriation, defalcation, false pretences, or fraudulent misrepresentation;
- any fines, penalties, or restitution orders that are imposed by the courts;
- any award of damages by a court for bodily injury, sexual assault, and wrongful death;
- a dividend (amount paid to the creditor from a bankruptcy or proposal) a missed creditor would have received in the process if they had received notice.

This list is based on the Act and there is several court precedents and interpretation into various situations. If you are from the Kitchener-Waterloo area and are experiencing financial difficulties with your debts, please call our Kitchener office at 747-0660 or 310-PLAN or e-mail us a question .