Bankrupt divorcees can renege on equalization payments
Thinking of splitting up? Make sure you know what you’re doing – particularly if your soon-to be-ex is having some financial troubles.
Thanks to a recent Supreme Court of Canada, declaring bankruptcy after a divorce may help get you out of making certain settlement payments to an ex-spouse.
Going bust won't excuse a divorced man or woman from making alimony or direct support payments, but the rules are a bit different when it comes to equalization payments, a process designed to ensure that both spouses end up with similar net worth after they split.
Here’s a recent example that, on the surface, seems simply unfair.
After filing for divorce after 20 years of marriage, Susan Schreyer made an equalization claim against Anthony Schreyer, who owned the family farm.
Under their divorce agreement, the husband was to continue to live on the property, which he solely owned, and their assets were to be valued.
Before the evaluation of the land was completed though, the husband went bankrupt.
Even though the wife was subsequently entitled to an equalization payment of around $41,000, it disappeared along with all his other debts as a result of the bankruptcy. The husband was allowed to keep the farm, however, leaving her watching through the windows.
Des all this sound fair to you? Have you had a similar experience when a relationship ended? How were things resolved?
By Gordon Powers, MSN Money