No Special Status for a Spouse in Bankruptcy

Ontario Real Estate Source

By Brian Madigan LL.B.

It may be unfair, but the wife lost out completely.

A husband and wife filed for divorce. The wife was entitled to an equalization payment. The assets were to be valued and an accounting was to be taken. However, before that took place the husband made an assignment in bankruptcy.

The wife was not listed as a creditor and did not receive any notice.

The husband was then discharged in bankruptcy. The effect was to eliminate the wife’s claim. The claim was one which was provable in the bankruptcy proceedings, and was therefore discharged.

This case took place in Manitoba and was decided by its Court of Appeal. A further appeal was made to the Supreme Court of Canada which denied the wife's claim. T

The effect of this case is the same in Ontario: no special status for spouses.

The equalization payment does not become a proprietary interest until it is due to be paid. Until then, it is just a debt like any other debt. It got swept up and discharged in the bankruptcy proceedings. There was no special status for spouses. Their claims were treated simply as any other claims by other creditors.

So, while on the one hand, one might think that a spouse would have special status, there is no such provision in the Bankruptcy Act.

Spouses BEWARE!

See: Schreyer v. Schreyer (July 14, 2011, Supreme Court of Canada)

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300
www.OntarioRealEstateSource.com