Do Support Orders Survive Bankruptcy? It is well known that child and support Orders are not extinguished when a paying spouse declares bankruptcy. Lorne MacLean, QC recently obtained an interim order barring a spouse from declaring bankruptcy in a complex hidden cash scheme involving a multimillion-dollar wholesale food supply business. But what happens if your ex-spouse or parent of your child declares bankruptcy after a support order and costs order related to it is made? We get asked the question: Do Support Orders Survive Bankruptcy? a lot. Contrary to what you might think, bankruptcy can actually increase your chances of collecting support as other creditors have their claims extinguished freeing up income to pay support!
Do Support Orders Survive Bankruptcy? Call 1 877 602 9900
178(1)(b) and/or (c) which defines that a discharge of bankruptcy does not release the bankrupt from obligation in relation to alimony or debt or liability arising under a judicial decision establishing support or under an agreement for support for a person and/or children who reside apart from the bankrupt.
Do Support Orders Survive Bankruptcy? Call 1 877 602 9900
In the 2019 BCCA decision of Dorey v Havens the highest court in BC dismissed an ex-husband’s application to vary lump sum child support and the costs order made with it on the basis that the chambers judge properly characterized the previous orders as at least in part related to “maintenance”, which to that extent were not extinguished by the father’s bankruptcy.
The answer to Do Support Orders Survive Bankruptcy is yes and so do costs awards made related to these orders.
The court found that it was open to the judge to attribute costs to support even though the orders had been entered. The judge is presumed to know the law and did not err in her assessment of s. 7 expenses. Her finding that the father failed to show a material change in circumstances is supported by the evidence and entitled to deference.
[16] As the judge pointed out to Mr. Dorey during his submissions, it is well-settled law that costs orders related to claims for support and maintenance survive bankruptcy: B. (K.J.) v. B. (W.S.), 2004 BCSC 837; S.L.M. v. D.R.M., 2003 BCSC 1094 [Manolescu]; Cain v. Hodgson, 2013 BCSC 310 (in Chambers); Sandhu v. Sandhu, 2012 BCSC 1183. In Bankruptcy of Patrick Lees, 2002 BCSC 570 [Re Lees], Mr. Justice Wilson stated the point clearly:
[17] It is beyond dispute that costs incurred in obtaining an order for child support are included in the notion of “any debt or liability under a support order”.
[40] As the chambers judge noted, there is conflicting jurisprudence on whether lump sum costs ordered by a judge fall within the definition of “taxed costs” in subsection 1(1) of the FMEA: see C.L.M. v. M.J.S., 2017 BCSC 1517; Olsen v. Chinniah, 2012 BCSC 624; Sandhu v. Sandhu, 2012 BCSC 1183; British Columbia (Attorney General) v. Houle (1994), 1 B.C.L.R. (3d) 215 (S.C.) (in Chambers); MacKenzie v. MacKenzie, 2011 BCSC 1652. The judge addressed the issue, saying:
[27] It is significant that the definition of “maintenance” is inclusive and expressly includes “lump sum” awards and “taxed costs awarded in relation to anything that comes within this definition”. The word “includes” expands the definition such that the words described as being included in the definition are not exhaustive or prescriptive but, rather, are in addition to, and not in limitation of, any words that have not been listed in the definition: see Ruth Sullivan, Statutory Interpretation, 3d ed. (Toronto: Irwin Law, 2016) at 79-81; R. v. McLeod, [1950] 2 W.W.R. 456 (B.C.C.A.); and Pacific Abrasives & Supply, Inc. v. British Columbia (Revenue), 2010 BCCA 369 at para. 18. As such, I am of the view that the definition of “maintenance” under ss. 1(1) is broad in scope and includes not only “taxed costs” relating to child support, but also those costs awarded by way of a lump sum to a spouse seeking to obtain or enforce a maintenance order.
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