Child Support During Bankruptcy or a Consumer Proposal

When you are dealing with debt and considering debt-relief solutions like bankruptcy or a consumer proposal, the questions start piling up fast. And if you are also responsible for child or spousal support, it is natural to wonder what happens next. Will the money I owe for child support change? How does this affect my ex? Will this impact alimony payments? Can bankruptcy help make things easier, or will they stay the same?

The short answer: child and spousal support stick around, but there is more to the story. It is not all doom and gloom—there are ways to manage your situation without losing your footing.

Today, we will cover the deal between bankruptcy and child support, legal protections, and how you can keep up with support payments when filing for bankruptcy or a consumer proposal.

Bankruptcy and Child Support: What is the Deal?

When you file for bankruptcy, your responsibility to pay child support does not just go away. You are still expected to make those payments, and they will be treated as a top priority over any other types of debts you owe.

Unlike credit cards, personal loans, or other unsecured debts, child support is considered an essential payment, and the courts make sure it stays that way.

Let’s say you have fallen behind on being able to pay child support before filing for bankruptcy—what happens to the payments you missed? Those missed payments, called arrears, will stick with you even after your bankruptcy is discharged. You will need to catch up on those overdue payments, even while bankruptcy might clear away some other types of debt.

Bankruptcy is designed to help you get a fresh start with your finances, but when it comes to child support, your responsibilities remain. It is there to ensure your child’s needs are being met, so it is protected from the debt relief process.

Why Is Child Support Considered a Priority?

Here is why child support does not get touched in bankruptcy: it is considered a “priority debt.” In the eyes of the court, it is much more important than, say, a credit card balance or a personal loan. Priority debts, like child support, need to be paid in full before other debts are addressed. So, if you are filing for bankruptcy, the money you owe in child support comes first.

Even if declaring bankruptcy helps you reduce or eliminate other types of debt, child support payments must continue. It is non-negotiable. If you are behind on child support, the courts will expect you to make good on those overdue payments as well, so bankruptcy will not let you off the hook for that.

Can Child Support Payments Be Reduced in Bankruptcy?

You might be wondering if there is any way to reduce your child support payments while going through bankruptcy. The simple answer is, not automatically. Bankruptcy does not change the amount you owe for child support. However, if your financial situation has changed a lot—maybe you have lost income—you could go back to family court and ask for a change in the amount you are paying.

But, keep in mind, this is not part of the bankruptcy process itself. You would need to show the court that your financial situation has shifted enough to warrant a change.

How Does Spousal Support Fit In?

Spousal support is like child support when it comes to bankruptcy. It is also considered a priority payment, and just like child support, spousal support does not disappear. If you are paying spousal support to a former spouse, you will still need to keep making those payments during bankruptcy.

Filing for bankruptcy might help with your other debts, but when it comes to spousal support, it is business as usual. The courts do not let these payments slip, even if bankruptcy clears away some of your other financial burdens.

What About a Consumer Proposal?

Maybe you are thinking about filing a consumer proposal instead of bankruptcy. The good news is that a consumer proposal is a flexible way to deal with your debts by negotiating a legally-binding plan to pay back a portion of what you owe over time to your unsecured creditors (the people you owe money to).

But here is the catch: child and spousal support still have to be paid in full, even if you file a consumer proposal.

While a consumer proposal can help you manage other debts like credit cards, personal loans, or medical bills, your payments do not change. These remain a priority, just like they do with bankruptcy. So, no matter what, you will need to stay on top of those support payments while you are working through your consumer proposal.

Legal Protections for Child and Spousal Support

Above all, the law makes sure these payments are protected. Bankruptcy or a consumer proposal might ease some financial pressure by dealing with your other debts, but it will not touch support payments. These payments are considered non-dischargeable, which means they do not go away.

Even if your other debts are settled, child and spousal support will remain your responsibility. And if you have fallen behind on payments, bankruptcy or a consumer proposal will not erase what you owe in arrears. You will need to catch up on those, too.

How to Keep Up with Support Payments During Bankruptcy or a Consumer Proposal

We get it—trying to manage debt-relief solutions like bankruptcy or a consumer proposal while keeping up with child support and spousal support can seem like a balancing act. But the good news is that a consumer proposal or bankruptcy can help free up some breathing room by clearing out your other debts. This might make it easier to stay on top of your support payments. while keeping up with child support and spousal support can seem like a balancing act. But the good news is that a consumer proposal or bankruptcy can help free up some breathing room by clearing out your other debts. This might make it easier to stay on top of your support payments.

Here are a few tips for managing child and spousal support if you have declared bankruptcy or are choosing the consumer proposal process:

• Review Your Budget: Take a fresh look at your income and expenses. With some of your other debts out of the way, you might have more room in your budget for support payments.
• Work with a Licensed Insolvency Trustee (LIT): LITs are experts in helping people through bankruptcy and consumer proposals. They can give you advice on how to manage your payments and debts during this time.
• Consider Going Back to Court: If your income has taken a hit and you genuinely cannot keep up with your child or spousal support payments, consider going to family court to request an adjustment. This cannot be done through bankruptcy or a consumer proposal—you would need to show the court that your financial situation has changed.

How Farber Can Help

At Farber, we understand that managing child and spousal support along with bankruptcy or a consumer proposal can feel like a lot to juggle. But you do not have to figure it all out on your own.

Our team of Licensed Insolvency Trustees is here to help you find the right path forward. Whether you are considering bankruptcy, exploring a consumer proposal, or just want to know your options, we are here to guide you.

Need help getting started? Book a free consultation with one of our experts today. We will walk you through your options, answer all your questions, and help you make the best decision for your financial future.