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Bankruptcy and Alimony – What You Need To Know

Posted by TMichalos on November 3, 2014

There is a common belief that by filing bankruptcy a person can “get out” of their obligation to pay alimony and child support.  This is simply not true.

Filing bankruptcy in Canada eliminates most unsecured debts. However there are certain debts that are specifically not discharged by the Bankruptcy and Insolvency Act and child and spousal support arrears are one of them. To make things even more complicated, alimony and child support payments fall into a special category of claims in bankruptcy that receive priority repayment.

Alimony and Support Payments

In 1997 alimony and support claims were made provable in bankruptcy, but not dischargeable.  By being provable, the claims could be submitted to the trustee by the spouse owed outstanding payment so that they could receive their share of any money coming out of the bankruptcy.  By declaring the debts not dischargeable, it meant that unlike other debts that are eliminated by bankruptcy, alimony and support debts survive the process.

The government went further by declaring any alimony or support arrears for the 12 months immediately preceding the date of bankruptcy as preferred claims.  These claims are paid in priority to other unsecured claims.  All other alimony and support arrears are treated like any other unsecured claims, except they survive the bankruptcy if they are not repaid in full.

Equalization Payments

Having explained how safe alimony and support payments are, I should warn you, payments for equalization are not currently protected under bankruptcy law.

The idea behind equalization payments is to balance the material gains a couple experience during their marriage in a divorce or separation.  The things that the spouses own are listed and valued.  The spouse with the higher value is required to make a payment or transfer to the spouse with the lower value.  When you file for bankruptcy, equalization payments are debts that are included in the bankruptcy. They are treated just like a credit card or other unsecured debt.  In other words, whatever portion remains unpaid, after any dividend payments from the bankruptcy, is eliminated once the person declaring bankruptcy is discharged.

Joint Debts

It is also important to understand that divorce or separation agreements to pay off joint debt are not upheld by bankruptcy (or by your secured creditors either).  Just because a divorce or separation agreement requires one spouse to pay off a joint debt, it doesn’t not absolve the other spouse from the obligation to pay.  I have seen hundreds of cases were the spouse required to pay off a joint debt filed for bankruptcy which caused the other spouse to repay the debt in full (which usually means they end up filing for bankruptcy too).

If you have joint debts that are to be apportioned during a divorce, it is important to get your creditor to agree, in writing, to remove the other spouse from any obligation to pay as well.

Court Orders

Here’s a final bit of advice.  Neither Bankruptcy nor Family Court will overwrite or undo Orders issued by the other Court.  That means:

  • if a separation agreement or Divorce Order has been released before someone files for bankruptcy then the Bankruptcy Court will not attack the transfer of assets, even if it is done within the reviewable period before a bankruptcy.
  • if a person has filed for bankruptcy then any assets they may have owned will be signed over to their bankruptcy – they are no longer available to be dealt with in a separation agreement or Divorce Order.

Careful planning is required before you file for bankruptcy and/or separation or divorce to deal with all of the matrimonial property in the most advantageous manner.

In Summary

The law around bankruptcy and divorce can get quite complicated but in general:

  • Alimony and support payments are not stopped when a person files for bankruptcy and any arrears survive the bankruptcy process.
  • Equalization payments are stopped when a person files for bankruptcy and any unpaid equalization payment is eliminated at the end of bankruptcy.
  • Co-borrowers become responsible to repay 100% of the joint debt if one of the borrowers files for bankruptcy, regardless of whether or not a separation agreement or Divorce Order required the first borrower to repay the debt in full.
  • Whichever comes first, bankruptcy or separation agreement and/or Divorce Order ranks in priority when dealing with the things a person owns.

Financial Recovery Process

Although bankruptcy does not eliminate alimony and support payments, it is still not unusual for someone who owes back support payments to look to bankruptcy, or a consumer proposal, as a financial solution.  If they owe significant other debts as well, bankruptcy can help eliminate previously build up credit card debt, lines of credit and other unsecured debts that an individual, now divorced and living on a single income, can no longer support. In the event that they have assets, including a home or car, that they would like to keep, a consumer proposal is another option.  By eliminating other marital or subsequent debts by filing bankruptcy or a consumer proposal, it is possible to improve your financial circumstances enough that meeting your support payments is much easier.

If you have questions about how a bankruptcy or consumer proposal can help in the financial recovery process after divorce, Ted can be reached through our website hoyes.com

Ted Michalos is a Chartered Professional Accountant (CPA) and a Licensed Bankruptcy Trustee. As a co-founder & President of Hoyes, Michalos & Associates, he speaks regularly at local commerce and professional events about insolvency issues and has testified before the Canadian Senate on issues of bankruptcy legislation. His expertise focuses primarily on helping individuals solve their financial problems.

Category Categories: Alimony, Child Support

You Can’t Change Other People, Only Yourself

Posted by Author - Wendi Schuller on October 18, 2014

Often we think that we can change someone else after marrying them. We can only change ourselves or our own reactions to people’s behavoir. We have excuses for partners’ actions, rather than accepting that maybe this is their true nature. Intrinsic values and ethics are part of a person’s core and not something that is easily shed after matrimony.

Nina started dating a guy in her large company who worked in a different section. She knew that he had dated many others and had the reputation of being a ladies’ man. Her older cousin had been a player and settled down into domestic bliss. Nina remembered the old cliché that it takes the love of the right woman to get a man to settle down. The actor Warren Beatty left his wild ways behind when he married Annette Benning. Nina’s friends had their doubts about this union, but did not want to voice them and hurt her feelings.

During the first year, John was going to singles bars with his buddies. He claimed it was just to hang out with friends, but Nina did not heed her gut feeling to part ways. When a job opportunity appeared in John’s hometown, Nina encouraged him to take it and they moved across country. She naively thought his family would keep him in line and a lack of singles bars would curb this laddish behavior. They later had two children but did not have a close marital relationship. There was no concrete evidence that John was being unfaithful, but he was disrespectful and callous towards Nina. After hanging in there for way too long, she finally filed for divorce. Today Nina describes every day as being like Christmas.

Sometimes a person goes into marriage thinking a party person will change their ways. Divorced friends have expressed this wisdom, to marry someone as they are –not what they could be. Small foibles and quirks are okay, however lapses of ethics are not. If there is any hint of disrespect, then move on. Expect to be treated with courtesy and consideration by a potential partner.

Consider meeting with a Divorce Coach to make sure that you are not repeating previous patterns in new relationships. Learning to listen to our gut feeling can save heartache down the road. Making excuses like Nina did, only prolonged an unhappy situation. Sometimes we just have to cut our losses and extricate ourselves from a toxic relationship.

After a divorce when contemplating remarriage, consider having pre-marital counselling. Discussing expectations, ethics, finances and the relationship is a good way to start anew. Reviewing effective and respectful communication makes for a stronger subsequent marriage. Pre-marital counselling deters partners from anticipating that the other one will change after the wedding. It is a reality check.

 reached at (740) 919-1248 or through her website.  http://www.womansguidetodivorce.net/

Wendi Schuller, uses her knowledge as a nurse, Neuro-Linguistic Programmer (NLP), and hypnotherapist, to author the book The Women’s Holistic Guide to Divorce that helps women regaining their strength of inner peace and wisdom. She can be reached by email  wendischuller@hotmail.com

 

 

 

Category Categories: Dating, Divorce, Love & Relationships, Marriage

6 Tips for Dealing with Debt in a Divorce

Posted by TMichalos on September 18, 2014

It is not unusual for a couple to accumulate significant debts together that must be dealt with as part of their financial arrangements in a divorce or separation. There are, however, several things that you should be aware of before proceeding.

In particular, it is important to know that a divorce or separation agreement will not eliminate your obligation to repay a debt you signed for. In other words, you cannot transfer liability for your debts or joint debts to one spouse by virtue of a divorce agreement alone.

Having said that, one spouse is not automatically liable for the debts of the other. You can only be held responsible for repayment if you have signed, co-signed, or guaranteed a debt yourself.

The best approach is to pay off any debt before filing for divorce, but this is not always possible. You may instead find that you have to divide the debt, and monthly payments, as part of the separation process.

If you wish to ensure that your debts are handled properly as part of your divorce or separation, follow these tips.

1. Obtain a copy of both spouses’ credit reports at the beginning of the process to ensure that you have a complete picture of debts that are owed both individually and jointly. This will help eliminate surprises down the road.

2. Talk to your lender. Your financial institution must agree, in writing, to remove any party from the obligation to pay under any loan agreement. This includes any debts guaranteed as well as loans you have taken out jointly.

3. Better yet, transfer all debts into new accounts under the name of the individual who will become liable under the divorce or separation arrangement. This may require refinancing in the event of major debts like a home mortgage or car loan. Failing to cancel joint debts can impact your credit report negatively in the event that your ex-spouse continues to utilize the account or does not make agreed upon payments.

4. Cancel all joint and supplementary credit cards and open new ones individually to ensure neither spouse can continue to incur more debts or will become responsible for the spending of the other.

5. If you have used any form of online banking, change all access and authorization numbers. Remove accounts as necessary to ensure each spouse only has access to those accounts they are now responsible for. Cancel any joint pin numbers if applicable.

6. If one spouse chooses to file for bankruptcy in order to deal with marital and other debts, it is possible to file a joint-bankruptcy or joint consumer proposal even if you are divorced. In the event of significant joint debts, talk to a bankruptcy trustee about your options.

As a final note, check your credit report every few months after your divorce or separation to ensure that all debts have been transferred properly and that your records have been updated. It is important that you manage not only the debt itself, but monitor your own credit history as you will likely be applying for new debt, individually, in the future.

Ted Michalos is a Chartered Professional Accountant (CPA) and a Licensed Bankruptcy Trustee. As a co-founder & President of Hoyes, Michalos & Associates, he speaks regularly at local commerce and professional events about insolvency issues and has testified before the Canadian Senate on issues of bankruptcy legislation. His expertise focuses primarily on helping individuals solve their financial problems.

Category Categories: Divorce, Financial, How to Divorce, Separation, Settlement

Social Media in Divorce

Posted by Author - Wendi Schuller on September 1, 2014

Many divorcing people are warned by lawyers not to post anything about their soon-to-be-ex on social media sites. You may have strict privacy settings, but not all of your friends do. This can hurt you in divorce proceedings when tactless statements about your spouse are on your friend’s social media sites. Even comments that you made in the pub may wind up as quotes on other people sites who have lax privacy settings.

Interviewers and bosses may be perusing Facebook and other sites. One woman made disparaging remarks about her boss and company that were repeated on her friend’s Facebook site. This woman had signed an agreement when hired, not to make public statements about her workplace or the personnel. She had strict privacy controls, however others did not, so these complaints circulated in the public domain. She was fired. In divorce, it could hurt you if the opposing lawyer finds out some unfavourable gossip with you as the source. It is critical to keep a job especially when money is tight post-divorce, so do not post anything that can be construed as negative. Have a talk with friends regarding what is allowed to be posted about you in general, on their sites. Some bosses and interviewers ask (demand) to be friended on new hire’s social media sites.

Before getting a divorce, delete any nude photos and erotic videos. Be vigilant and possibly hire a computer expert to make sure there are none lurking around including on phones.  The last thing that you want is for these to go viral at a later date, as has happened to some celebrities recently. This is not what you would want your children to view. Consider never letting any sexy pictures be taken of you in future relationships, so this is not a potential problem with a vindictive ex.

Some people have said that they only post on social media what they would want their mothers to read. They save the really juicy bits for gossip sessions with friends with an oath of privacy. My girlfriends and I still do the pinkie finger shake from grade school, when something absolutely cannot be repeated.

There have been court cases where social media remarks have been introduced as evidence. I know about this, because I passed around my husband’s profile from a dating site, stating he was single and without kids, during my divorce.

Do not check your ex’s sites, particularly if the painful divorce was not your choice. Seeing laughing photos with new dates is not therapeutic for moving on. It is also difficult if some of your family members are in your ex’s camp. Do you really want to read loving comments from them to your former spouse? If money is tight, do you want to know about his exotic trips? No. It is easier to heal from divorce when not seeking updates about your former spouse, but rather enlarging your own social network instead.

Wendi Schuller, uses her knowledge as a nurse, Neuro-Linguistic Programmer (NLP), and hypnotherapist, to author the book The Women’s Holistic Guide to Divorce that helps women regaining their strength of inner peace and wisdom. She can be reached by email wendischuller@hotmail.com

reached at (740) 919-1248 or through her website.

Wendi Schuller, uses her knowledge as a nurse, Neuro-Linguistic Programmer (NLP), and hypnotherapist, to author the book The Women’s Holistic Guide to Divorce that helps women regaining their strength of inner peace and wisdom. She can be reached by email.


 

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Category Categories: Divorce

The Adventure of Divorce

Posted by Author - Wendi Schuller on August 22, 2014

Divorce is a new beginning that opens unexpected doors. Venturing into the unknown leads to exciting new adventures that were only in dreams while still married. The unknown can be perceived as scary or reframed as a new discovery. One’s outlook on life will determine if post-divorce is a tragedy or a time of renewal. If your perception of the world is that it is a negative place with untrustworthy people, then that is what you will experience. Change your outlook to a positive one, and kind people and worthwhile experiences will come into your sphere. How to do this? A life coach can give a reality check and a therapist more intensive treatment. Work on the baggage from divorce in order to be able to recognize and receive new opportunities coming your way.  Do not drag old problems along with you when meeting new people or getting a job. Fix them and start life with a clean slate.

A positive aspect of divorce is enlarging your social circle. Do the necessary housecleaning of getting rid of toxic or energy draining relationships. Sometimes the logistics of divorce will take care of this for you. Moving during divorce does the job of eliminating annoying neighbors. Look closely at friendships that no longer serve your best interests or are reciprocal in nature. Let divorce be your excuse that you are too busy and unavailable now to continue seeing them. Embark on the adventure of meeting like-minded folks who better reflect who you are currently.

During marriage, you may have been focused on your spouse’s wants and needs. Now you have the time to reach out to others and form new friendships or reconnect with the ones that you already have. It takes a lot of energy keeping up appearances in a bad marriage, so use this post-divorce time to join interesting groups and become involved with new people.

Go on a quest of uncovering your talents and hidden desires after divorce. My artistic friend has launched a line of cards post-divorce and feels more fulfilled. One woman who felt her creativity was stifled during an abusive marriage, is writing the second edition of her book. Going down the path of creativity is an adventure with exciting twists and turns. There are glimpses of what is lies ahead, however the final outcome is yet to be determined. Mine may be a move to a different country.

Have post-divorce adventures through travel. Get out of your comfort zone and discover the world. While having fun and learning about new cultures, one learns to rely on herself. Finding your way out of a labyrinth in Santorini, or miming in Italy that you want to buy a bottle of white sparkling wine promotes self-assurance. One comes to the realization that they are a strong person who can deal with many situations. I view life in general as an adventure, whether I am buying an item in a Turkish souk or in my local grocery store. Strangers can be a fascinating source of interesting conversations. There are companies that have trips for singles or find a group tour if unsure about visiting foreign countries on your own.

Post-divorce, some entrepreneurs have started their own businesses. Many claim it was a bumpy road at first, but are now enjoying this new enterprise. Take classes to develop your talents and interests into financially feasible ventures. One fellow went through a traumatic divorce and renewed his love of gardening afterwards. He is into cross-pollinating vegetables and flowers. Talking to a waiter and patrons at his local pub about this hobby, led to the owner asking to buy his heirloom produce.

Contemplate viewing the world as making new connections, and discovering opportunities. My 90 year old friend said that life is such an adventure, because he never knows what is just around the corner.

Wendi Schuller, uses her knowledge as a nurse, Neuro-Linguistic Programmer (NLP), and hypnotherapist, to author the book The Women’s Holistic Guide to Divorce that helps women regaining their strength of inner peace and wisdom. She can be reached by email. wendischuller@hotmail.com

Category Categories: Divorce, Emotions

Red Flags When Dating Again

Posted by Author - Wendi Schuller on August 1, 2014

One may have gotten through a traumatic divorce and is now on the path to recovery. Perhaps a stint in therapy gave insight on how to avoid repeating the same relationship patterns that contributed to the demise of the marriage. A charming suitor enters your life and is breaking through your barriers. How does one differentiate between someone who is potentially dangerous from a soul mate?

  • Trust your gut feeling. What is your initial reaction to this person? Are you comfortable or a tad uneasy? Your subconscious is screaming at you that something is not right, and a bit off. Things do not quite synchronize, actions vs explanations. It is easy to give someone the benefit of doubt a few times. When this becomes a pattern, then it is a red flag. Does he seem caring, yet you feel like pulling back, but are trying to analyze why? Listen to your body, are you tense, but not sure of the cause? When you have an unsettling feeling, then investigate the cause of it.
  • The new relationship moves too quickly and becomes intense. One may rationalize that it is love at first sight, but that is still not a reason to move from just meeting someone to becoming a tight couple.  We may have lost self-esteem in our marriage and here is a person who thinks we are absolutely wonderful. Some very charming individuals are cons who prey on vulnerable people. Whether they are conning elderly out of life-long savings, or on the verge of proposing, they are after something.  In retail, the saying, “If it seems too good to be true, then it is” also applies to dates. If someone seems too perfect and just what you need, take your time in getting to know that person. If it is love, they will not rush you into a situation that you are not ready to be in.
  • When one’s friends and family are asking if you have taken leave of your senses that is a major clue that something is not right with your new partner. Are you getting angry with the negative feedback from loved ones or really listening to unanimous lack of approval? Put your feelings and ego aside and determine just what their uneasiness is about regarding your new girlfriend.
  • How do you know this person is trustworthy? Ask to meet their friends. What is their family situation? Are they secretive or more like an open book?  If there are gaps in what they tell you about their personal history or family life that is a red flag. Some women have unwittingly dated men who had spent time in prison.  I started going out with a fellow who was so attentive, but did not want me to see his apartment or know much about his life when we were not together. I broke things off quickly, but found out later he was married and they were expecting a child. If you cannot seem to get a guy to open up, consider doing a little online checking or hiring a private detective. No that is not romantic, but it is better than having your heart broken or your money gone at a later date.
  • Do they blame others constantly for their life woes? Is it someone else’s fault that they do not keep a job or have money? Has he asked to borrow money and then has excuses why it is not paid back? Does she like to go shopping with you for her expensive baubles?
  • If someone is rude to wait staff or salesclerks, then that is not a nice person. Some people are social climbers or do not care about people who are not in the position to help them to succeed.
  • Listen to their jokes and stories.  One newly married woman was appalled at her husband’s “joke.” The punch line was a man was having sex with a beautiful woman, but it was against her will. The shocked wife said “that is rape.” The husband said no, it is just that the woman did not want it. The wife discovered that women were objects in her husband’s eyes, and that couple eventually got a divorce.

 

There is something to the Biblical quote:

Love is patient, love is kind.
It does not envy, it does not boast,
It is not proud. It does not dishonor others,
It is not self-seeking, it is not easily angered,
It keeps no record of wrongs.
Love does not delight in evil
but rejoices with the truth.
It always protects, always trusts,
always hopes, always perseveres.
Love never fails.

 

Get to know a potential partner slowly over time. See how they act around others and if all are treated with respect and kindness, including animals. Meet their family and friends. Determine if there is a firm foundation to your relationship, with similar interests and ethics. Avoid these red flags and enjoy your friendship which is changing into love.

 Wendi Schuller, uses her knowledge as a nurse, Neuro-Linguistic Programmer (NLP), and hypnotherapist, to author the book The Women’s Holistic Guide to Divorce that helps women regaining their strength of inner peace and wisdom. She can be reached by email  wendischuller@hotmail.com   

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Category Categories: Dating, Love & Relationships