Are you wondering does child support ends when you are insolvent? In Canada, all children have a legal right to financial support from their parents.

When some parents separate, they’ll agree on child support payments; in other cases, it’s up to a court to decide. But there is one constant: parents have to pay child support.

Payment is non-negotiable: it doesn’t matter if the parents are no longer amicable; it doesn’t matter if one parent doesn’t see the child, and it certainly doesn’t matter if one parent doesn’t want to pay.

But what if a parent is unable to contribute financially? Does child support end if you declare bankruptcy? In Canada, the answer is an unequivocal no: you still have to make child support (and alimony) payments amid the bankruptcy process.

Bankruptcy in Canada

So how does bankruptcy work in Canada? Broadly, bankruptcy is a legal process used to clear your debts. Honest individuals can be saddled with unpayable debt, and bankruptcy helps them shed their debt, with some strings attached.

There are generally three ways for an individual to declare bankruptcy: voluntary assignment (you assign your assets to a trustee to pay your debts), involuntary assignment (a creditor petitions in court to receive your assets), and deemed bankruptcy (you don’t adhere to the bankruptcy conditions provided by a court or creditors).

The bankruptcy process

But before you declare bankruptcy, you should consider whether you genuinely need to. Of course, your circumstances will be unique, but here are some common occurrences for individuals who need financial assistance.

If you miss mortgage or loan payments; you often use credit cards, and your cards are at their limit; you receive notifications from collection agencies, or you have received a legal notice regarding debt collection.

If you think bankruptcy is the best way forward, contact a licensed insolvency trustee — only they can provide government-regulated solutions to your debt. A LIT can halt legal or collection action taken against you.

They’ll then help you with the necessary paperwork, such as an “assignment” (as discussed above) and a “statement of affairs” (a description of your income, assets, liabilities and expenses).

During the process, you’ll still have financial commitments. These include counselling and money management courses, income and expense reports, payments and administrative fees, taxes, and, of course, child support.

Does child support end and do I need to make payments?

So you’ve declared bankruptcy. What next? How do you make your child support payments? While you can’t defer or suspend your child support payments, you may be able to reduce your other bills and expenses, leaving you with more money for your child.

In this case, a debt professional or insolvency trustee can help you file a consumer proposal.

You’d file a formal proposal with your creditors to repay a segment of your debt and ensure you can keep up with your support payments.

What if I’m supposed to receive the child support payments?

Don’t worry: if you’re the one receiving child support payments and your ex-partner files for bankruptcy, you’re protected. Divorce or separation is a financially (not to mention emotionally) draining process, so it’s not uncommon for one partner to accrue unexpected debt.

s. 178 of the Bankruptcy and Insolvency Act protects you in this situation; as we’ve established, child payment obligations aren’t excused by bankruptcy, and you’ll be paid before any creditors.

What about spousal support?

Like child support, you still have to pay spousal support payments (also known as alimony) if you declare bankruptcy. And if your ex-partner declares bankruptcy, you’ll be a preferred creditor — meaning you’ll still receive the payments to which you’re entitled.

That said, a bankruptcy claim can expunge an individual’s equalization payments. Equalization occurs when, during a divorce process, a court orders the spouse with larger assets to pay their ex-partner.

The goal is to divide a family’s assets equally. Typically, the equalization is half the difference between the spouses’ assets, but that amount can be altered.

How does bankruptcy impact equalization?

So how does bankruptcy impact equalization? A Supreme Court of Canada case dismissed a woman’s claim that she was entitled to an equalization payment of  $41,063.48 after her ex-husband sold the family farm on which they lived. While the Court did dismiss her claim, they noted the shortcomings of the Bankruptcy and Insolvency Act.

What’s more, they encourage the legal system to provide more support to individuals in this position — particularly through increased spousal support payments. So if you’re worried about lost equalization payments because of bankruptcy, there’s a chance you’ll receive larger support payments as a remedy.

Does child support end with bankruptcy?

Regardless of your situation, one fact remains constant: even if you declare bankruptcy, you still have to make child and spousal support payments. The reverse is true, too; even if your ex-spouse declares bankruptcy, you’ll always receive the payments you need.

Children have the right to financial support, and bankruptcy will not stop that. Courts, creditors, and trustees understand that bankruptcy can happen to honest, hardworking people — especially following a separation.

So if you’re struggling to make support payments, get in touch with a licensed insolvency trustee. They can help you avoid legal action and reduce your other expenses.

Child support isn’t intended to leave you destitute — it’s designed to provide children and caregivers with the necessary resources. And there’s never shame in voluntary bankruptcy — you’ll be taking the best action for yourself and your children.