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Child support and spousal support owed under a court order or separation agreement are “provable” in bankruptcy. This means that if you are owed child support or spousal support, you are entitled to the same pro rata distribution as all other unsecured creditors.
Bankruptcy, Child Support, and Spousal Support
The relevant section of the Bankruptcy and Insolvency Act is section 121(4), which provides:
A claim in respect of a debt or liability referred to in paragraph 178(1)(b) or (c) payable under an order or agreement made before the date of the initial bankruptcy event in respect of the bankrupt and at a time when the spouse, former spouse, former common-law partner or child was living apart from the bankrupt, whether the order or agreement provides for periodic amounts or lump sum amounts, is a claim provable under this Act.
Sections 178(1)(b) and (c) of the Bankruptcy and Insolvency Act provide:
An order of discharge does not release the bankrupt from:
(b) any debt or liability for alimony;
(c) any debt or liability under a support, maintenance or affiliation order, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt;
This means that when your spouse emerges from bankruptcy, the child support and spousal support debts owed do not get discharged (unlike all other debts).
As well, child support and spousal support arrears owing from the year prior to bankruptcy, and any lump sum child support or spousal support obligation, are given priority over other unsecured creditors. The relevant section of the Bankruptcy and Insolvency Act is section 136(1)(d.1), which provides:
136. Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:
claims in respect of debts or liabilities referred to in paragraph 178(1)(b) or (c), if provable by virtue of subsection 121(4), for periodic amounts accrued in the year before the date of the bankruptcy that are payable, plus any lump sum amount that is payable;
In addition, enforcement proceedings for child support and spousal support can continue during a bankruptcy, except against the assets that the trustee is holding. The relevant section of the Bankruptcy and Insolvency Act is section 69.41, which states:
Sections 69 to 69.31 do not apply in respect of a claim referred to in subsection 121(4).
Notwithstanding subsection (1), no creditor with a claim referred to in subsection 121(4) has any remedy, or shall commence or continue any action, execution or other proceeding, against
(a) property of a bankrupt that has vested in the trustee; or
(b) amounts that are payable to the estate of the bankrupt under section 68.
In short, if you are owed child support or spousal support, the fact that your spouse goes bankrupt should have little effect on the support you will receive.