Bankruptcy and Family Law Equalization Payments

Supreme Court of Canada building

Supreme Court of Canada building (Image via Wikipedia)

The Supreme Court of Canada yesterday handed down a unanimous decision in a case called, Schreyer v. Schreyer.  The Court upheld a previous decision by the Manitoba Court of Appeal to the effect that a payor spouse could be relieved from an equalization debt by a bankruptcy claim.  The complete Reasons for Judgment are available here.  A summary of the Court’s decision by Andrew Feldstein, a Greater Toronto lawyer whose practice focuses on family law, can be read at his blog post here.

Here’s how the National Post online commented on the decision:

Declaring bankruptcy won’t excuse a divorced man or woman from making alimony or support payments, but the Act doesn’t address equalization payments, the process that aims to ensure both spouses have similar net worths following divorce.

Again, from Andrew Feldstein’s summary of the case and decision:

The Supreme Court did, however, call on parliament to address this issue. The Court stated that these inequities must be dealt with by an amendment to the Bankruptcy and Insolvency Act.  The Supreme Court stated that until such legislative changes are made; this was the only result possible on the facts of this case.