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  • I’m in Debt and Can’t Afford to Make Child Support Payments

    Chris Northey

    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 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 payor’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

    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 for past due amounts, arrears and interest
    • Garnishment of federal payments, such as income tax refunds
    • Suspension of driver’s license
    • Revocation of passport
    • Seizure of bank accounts or other valuable assets
    • Reporting non-payment to credit agencies to tarnish your credit rating

    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 there are some available options.

    Reducing Child Support Payments

    This can be done outside of court through a mutual agreement between 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 payor can petition the court for a reduction citing “undue hardship.” Reasons for undue hardship may 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 payor if he or she is maintaining a higher standard of living than the payee, and it is likely that the payor 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 payee can re-petition the court.)

    Debt Consolidation Loans and Programs

    Rather than deal with the courts, 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 your debts, usually through a bank, credit union or finance company. The benefit of a loan is that you can use it to pay any back payments you may owe on child support. However, 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, you continue to have access to your credit cards, which often makes the situation worse because you continue to accumulate debt while still having to pay back this extra loan. 

    A Debt Consolidation Program on the other hand doesn’t involve taking out a loan, but rather is an arrangement with a 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 eliminated entirely). This makes managing your debt easier and helps you pay it off faster, and 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.

    Credit Canada is Here For You

    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 giving you a revised budget. Give us a call at 1-800-267-2272 to speak with one of our caring credit counsellors. It’s completely free and confidential, and we may be able to have you living debt-free sooner than you think.

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    Topics: Kids and Money

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