Ontario Courts Confirms that Declaring Bankruptcy Does Not Eliminate a Parent’s Child Support Obligations
The Ontario Court of Justice recently discussed whether it has jurisdiction to make decisions in a case where a payor parent who was in significant child support arrears had declared bankruptcy. The bankrupt parent had argued that the court did not have the power to proceed with the default hearing (i.e. the proceeding in which she would have to explain why she was unable to pay the arrears) for as long as she remained an undischarged bankrupt. The Court of Justice disagreed.
In 2014 a court order obligated the payor parent (Anna) to pay the payee parent (Jefferson) more than $2,300 monthly for child support of the former couples three children. In 2016 a subsequent order compelled Anna to pay Jefferson $100 for one of the children’s glasses, and almost $900 for her portion of dental expenses for the children.
When Anna did not comply with either of the above orders, they were filed with the Family Responsibility Office (FRO) for compliance.
Anna filed for bankruptcy in February 2016 and a Trustee was appointed to deal with the matter. In August 2016, the FRO sent a Proof of Claim to the Trustee noting that as of the date of the bankruptcy Anna owed Jefferson more than $5,000.00.
Since Anna’s bankruptcy filing, the child support arrears have increased to more than $50,000.00.
The Positions of the Parties
Anna argued that once a payor parent declares bankruptcy, the Ontario Court of Justice has no jurisdiction over that parent for as long as the parent remains an undischarged bankrupt.
The FRO argued that under the Banktruptcy and Insolvency Act (BIA) the enforcement of a support order is not stopped by a support payor’s assignment in bankruptcy. The only time that enforcement of a support order cannot proceed is if it is against:
- A property that has vested in the Trustee; or
- An amount payable to the estate of the bankrupt.
Section 41 of the Family Responsibility and Support Arrears Enforcement Act (FRSAEA) addresses how default hearings (i.e. hearings over money owing in a family law context) are carried out.
The section states that unless it can be shown otherwise, a payor will be presumed to have the ability to pay the arrears and make any subsequent payments required under a court order, unless it can be shown to be otherwise.
At a default hearing, a support payor who is in arrears is required to appear before the Court to explain the default, and to provide a financial statement and proof of income. The support payor also has the onus (i.e. responsibility) or proving that they do not have the ability to pay the arrears and must make any subsequent payments that are due under the outstanding order.
Unless it is satisfied that the payor is unable to pay the arrears or subsequent payments for valid reasons, the Ontario Court of Justice or the Family Court has the power to, among other things, order that the payor:
- Pay all or part of the arrears in a lump sum or through whatever payment plan the court thinks is just (importantly, an order for partial payment does not rescind any unpaid arrears);
- Discharge the arrears in full by a specific date;
- Comply with the order to the extent of their ability to pay;
- Make a motion to change the support order;
- Provide security for the arrears and subsequent payments in whatever form the court requests;
- Periodically report to the court, the Director of the FRO, or another person specified in the order;
- Provide details of any change of address or change of employment to the court, the Director of the FRO, or another person; or
- Be imprisoned either continuously or intermittently for no more than 180 days or until the arrears are paid (whichever is sooner).
The BIA states that any family support claim payable under an order made before the date of the initial bankruptcy is a provable claim under the BIA. In addition, any debt or liability from an “agreement for maintenance and support of a spouse former spouse, former common-law partner or child living apart from the bankrupt” (i.e. a spousal support or child support order) is not released by order of discharge.
In an earlier decision, the Ontario Superior Court of Justice found that “support claims…are not stayed by banktuptcy proceedings”.
Justice Polowin agreed with counsel for Anna that the Ontario Court of Justice does not have jurisdiction to deal with bankruptcy matters but noted that a default hearing is not a bankruptcy matter. Rather, it is a family law matter intended to enforce a support order.
Since a default hearing deals with the failure of a payor parent to pay support, it does not fall under the stay provisions of the BIA. The only time that enforcement of a support order cannot proceed is if, as is earlier pointed out, it is against property that has vested in the Trustee or related to an amount payable to the estate of the bankrupt.
The sections of the FRSAEA dealing with default hearings and the sections of the BIA dealing with stays are not in conflict. Rather, they both allow “for the important legislative and social objectives of supporting families and ensuring support obligations are honoured”.
Justice Polowin went on to note that allowing a default hearing to proceed against an undischarged bankrupt will ensure that all available statutory remedies can be pursued to ensure the payment of child support or spousal support.
Justice Polowin concluded that:
the default hearing is not a bankruptcy matter and that it is not stayed under the BIA, the FRSAEA makes it clear at ss. 41(25) that the jurisdiction to conduct a default hearing in a non-family court jurisdiction lies solely with the Ontario Court of Justice.
As such, despite the “interesting argument” that the court had no jurisdiction, the request to dismiss the default hearing due to lack of jurisdiction is dismissed.
If you are contemplating separation or divorce, it is crucial to obtain guidance from a family lawyer who understands your specific needs. Mark Feigenbaum can ensure that you meet your child support obligations, while maintaining financial stability, and protecting your assets. Contact Mark online or call him at (905) 695-1269 or toll-free at (877) 275-4792 to book a consultation.