The dissolution of a marriage or a relationship between two people can be a difficult and stressful time. Add children to the mix, and things can become even more complicated, both emotionally and financially. If you're in debt and you have the added financial responsibility of child support, it might take some extra know-how to learn how to manage both.
In Canada, there are approximately 1.2 million separated or divorced Canadians with children 18 years or younger. Child support payments can range from under $1,000 to over $10,000 depending on the payer’s income and the number of children needing support. While we often hear stories of a parent intentionally withholding payment, it’s not always out of negligence or spite. Many times, the parent responsible for making the payments simply can't afford to make them due to debt.
Penalties for Non-Payment of Child Support (Jail, Fines, & Rights Revoked)
Since Canadian law requires that the parent responsible for paying child support make their timely payment each month, non-payment can have some serious consequences, including:
- Garnishment of wages. The court can decide to remove a portion of your paycheck and deliver it to the custodial parent; they can also collect interest on past due amounts.
- Garnishment of federal payments. The court can seize your income tax refunds and deliver them to the custodial parent.
- Suspension of driver's license and/or marine and aviation licenses. Payment must be made in full to have these privileges restored.
- Revocation of passport. Payment must be made in full and then the court will need to place a request to end the suspension with the Department of Justice Canada.
- Seizure of bank accounts or other valuable assets. If your wage garnishment doesn't cover the amount you owe, the court can seize other items, including stocks and savings, or assets such as homes, cars, motorcycles, boats, etc.
- Reporting non-payment to credit agencies. This will tarnish your credit rating and make it difficult to get credit or loans.
- Jail time. Failure to pay can result in the court sentencing you to jail.
These penalties vary by province, as does the agency that enforces payment. For example, in Ontario, the Family Responsibility Office or FRO handles non-payment issues regarding child support.
So what if you simply are unable to make payments after a divorce or separation due to debt? Of course supporting your child should be your number one priority, but you do have different options on how to do that.
Reducing Child Support Payments
Reducing your child support payments can be done outside of a court through a mutual agreement between both parents. If the payment is court ordered, the new agreement will still need to be filed with the court. If an agreement cannot be reached, the payer (person responsible for making child support payments) can petition the court for a reduction citing “undue hardship.” Reasons for undue hardship can include:
- Excessively high debt from supporting the family prior to the separation
- Excessively high costs associated with visiting the child
- A legal duty to support another person or another child from another marriage or relationship
- A legal duty to support a person who cannot support themselves due to illness or disability
It’s worth noting that courts will not be in favour of the payer if he or she is maintaining a higher standard of living than the payee, and it is likely that the payer will be expected to resume the original child support payments in a reasonable amount of time. (If, at that time, the undue hardship still exists the payer can re-petition the court.)
Debt Consolidation Loans and Programs
Rather than having to go through the court system to help manage your child support payments, another option may be debt consolidation. Debt consolidation is the process of combining two or more debts into one payment. There are two main debt consolidation options: loans and programs, and either may help depending on your individual situation.
A debt consolidation loan involves taking out a loan to pay off all your debts, usually through a bank, credit union or finance company. The benefit of a debt consolidation loan is that you can use it to also pay any back payments you may owe on child support. However, in order to obtain a debt consolidation loan, your credit rating and score must be in good standing, which is often not the case for those in debt or those having recently gone through a divorce. Also, after you acquire your debt consolidation loan to pay off all your debts, you will continue to have access to your credit cards. This often makes your debt situation much worse because you continue to accumulate more debt while still having to pay back this extra big loan.
A Debt Consolidation Program on the other hand doesn’t involve taking out a loan. Instead, it's an arrangement with a non-profit credit counselling agency where a certified Credit Counsellor will negotiate with your creditors to either stop or reduce the interest on your debt. They will also propose a new repayment schedule that works with your budget, so you can realistically pay off your debt over time. Your debts are combined and interest is reduced (and sometimes stopped entirely). This makes managing your debt easier and helps you pay it off faster. Your Counsellor will also provide money management and budgeting tools to help ensure you never find yourself in debt trouble again. You won't be able to include child support payments into the Program, but by rolling all your other debts into one manageable payment, you are more likely to be able to manage paying child support.
Get free help managing your child support payments
Divorces and separations aren’t easy, and money matters can make things even worse. If you’re struggling to make child support payments due to debt, we might be able to help through our Debt Consolidation Program, or even just by giving you a revised budget. Give us a call at 1.800.267.2272 to book a free appointment with one of our caring Credit Counsellors. All of our counselling is free, confidential, and non-judgmental and we may be able to have you living debt-free sooner than you think.