Bankruptcy and Equalization Payments

[Jeff]

Today the Supreme Court of Canada affirmed that a person owed an equalization payment is simply a creditor and if the person required to make the payment goes bankrupt, the debt for the equalization payment gets discharged the way debts ordinarily do in bankruptcy:

CTV Edmonton - SCC: Under bankruptcy law, divorcee cleared of payments - CTV News

A Manitoba woman will get nothing after her ex-husband declared bankruptcy following their divorce, effectively clearing him from a debt to his former wife but allowing him to keep the couple's assets.



The Supreme Court of Canada issued the unanimous decision Thursday morning in the Schreyer versus Schreyer case, dismissing an appeal filed by the wife.



However, the court said in its judgment that Parliament needs to act to close the loophole that allowed the situation to occur.

 

[Mess]

And the judgement calls on parliament to close the loophole. So look for the Conservatives to update the Divorce Act. Write your MPP now regarding other issues like equal parenting.

 

[HappyMomma]

Just came by to post that myself!

I personally think this is great news. For now anyway.

Well, I should clarify - not nice that he got to keep all the assets and she got nothing, however, being forced into bankruptcy and then being expected to pay out again is rough.

In Ontario, you don't get to keep a whole lot in the way of assets unless you pay for them, which I'd guess most people declaring would be unable to do. Looks like Manitoba has slightly different rules on what you can keep.

 

[NBDad]

Same in any province. Ex wife could easily hire a lawyer to force the sale of assets to cover the debts owed. As a creditor, she has the right to contest the bankruptcy and to force the sale of assets.

 

[Looking4Answers]

Well this case has to do with Equalization Payments. They failed to mention if this man was paying support. If so, the support payments would not be wiped out because of declaring bankruptcy.

Her lawyer messed up bigtime, if an amount of $41,000 was owed to the spouse then it should of been Ordered that the husband take out a 2nd mortgage to pay the wife, rather than leaving this amount on an NFP.

What this tells me is that if there sum of money which is owed by the applicant or the respondent, its best to get it off the Net Family Property, if it means you can declare bankruptcy.

Wake up call to everyone!!!

 

[slughead10]

my lawyer seems to suggested that this will even apply to pension as this is part of equalization....yippe i have a way out..finally things dont look to gloomy

 

[ddol1]

I read these posts three times! Anyway close to my heart - If the equalization is made from the net family property and then the house is sold with the proceeds going 50-50 then is there any chance this issue could come to haunt the one in need of the equalization payment as a matter of survival? Is there a clause or something that must go into the seperation agreement that the equalization payment happen BEFORE the moneies are parted out by whatever the net family property and the ensuing equalization payment.

If the equalization happens before (or perhaps as) the hammer hits then there would be no chance for this loophole to be used by any spouse facing an equalization payment. I have done alot of thought re the huge equalization payments in judgements and i could only come to the conclusion that it was based solely on the fact that everything of value was under the affected party - the equalization was just that - to make sure that that shareable property is indeed shared...... I think I am right when i think that often it is the cause of retirement pensions that cause such huge net property differences?