Family Law Equalization Claims and Bankruptcy - Schreyer v. Schreyer (2011 SCC 35)

The parties married in 1980, separated in 1999 and filed for divorce in 2000. Before a master undertook the valuation, the husband made an assignement in bankruptcy without listing the wife as a creditor. She did not receive any notice of the assignment as well. Husband’s bankruptcy was discharged in 2002. The master subsequently proceeded with the valuation and found that the wife was entitled to an equalization payment of $41,063.48. The Court of Appeal held that the wife’s equalization claim was provable in bankruptcy and had been extinguished by the discharge of the husband’s bankruptcy.

On July 14, 2011, the Supreme Court of Canada agreed with the Manitoba Court of Appeal, and dismissed the wife’s equalization claim. Manitoba is an “equalization jurisdiction”, and not a “division of property jurisdiction”. Ontario is also an “equalization jurisdiction”. The wife did not have any proprietary right in the husband’s property, and was therefore only a creditor of the husband.

As to the effect of bankruptcy, the wife’s claim was provable in the husband’s bankruptcy. It was neither proprietary, nor was it exempt from the effect of a discharge as a claim for support or maintenance. Upon the discharge of the husband,  he was released from all claims provable in bankruptcy, including the equalization claim.

Link to the case: Schreyer v Schreyer (2011 SCC 35) – http://scc.lexum.org/en/2011/2011scc35/2011scc35.html

Courtesy: http://www.toonpool.com/cartoons/the%20divorce%20sttlement_35110

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