If you file bankruptcy, you are still liable for certain debts. Among the debts that you are liable for are those that are ordered by the court, including child support and alimony. According to sections 178(1)(b) and (c) of the Bankruptcy and Insolvency Act:
An order of discharge does not release the bankrupt from:
(b) any debt or liability for alimony;
(c) any debt or liability under a support, maintenance or affiliation order, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt;
This basically says everything one needs to understand about the law.
When you file for bankruptcy, there are two types of debt involved: unsecured and secured. Here’s how they differ.
Unsecured
Unsecured debts are debts such as credit card accounts, discount store accounts and so forth that you don’t put up any sort of collateral for. These debts are also not backed by the government. A student loan, for instance, isn’t discharged in a bankruptcy, as the money you owe for your student loan is guaranteed by the government.
Most people really get in trouble because of unsecured debt more than anything else. Oftentimes, people who start running up credit card bills end up getting socked with such high interest rates that they could never pay them off, using simple math as a criteria to decide whether or not that was possible, and end up getting buried further and further in bad credit products.
Getting rid of the unsecured debt can be enough to make life a lot easier for most people. In fact, this is the type of debt that most people are concerned with getting rid of right away.
Secured Debts
The most common types of secured debts that people have are mortgages and cars. These are secured by the item that the money was lent to purchase in the first place. For instance, if you stop paying on your mortgage, the bank can take your house. If you stop paying on your car, the bank can take your car.
Money that you were ordered to pay via the courts is a similar to secured debts because they will survive your bankruptcy. That means that filing for bankruptcy will not get rid of your obligation to make child support or court ordered alimony payments. It’s an obligation that is yours legally and, in the case of child support payments and alimony, it’s money that’s intended to help your family survive and that you have a genuine responsibility to provide.
If you have questions about how to make ends meet when you are in truly desperate and are ready to declare bankruptcy, talk to your Trustee about the matter. You will receive a mandatory two counseling sessions during the bankruptcy process, each of which will give you information on how to better manage your money, even when you don’t have that much to manage at all. This can help you to make your payment obligations.
