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Intersection between family law and bankruptcy claims- Part 2

Once an order or agreement characterizes lump sum payments as spousal support, a recipient cannot change that characterization (i.e. to an equalization claim) in order to avoid the payor’s motion to reduce support. When spousal support is characterized as a lump sum, it doesn’t change the fact that, like any other support obligation, if it isn’t owing until a future date, it can be reduced if the payor is able to satisfy the court that it’s no longer appropriate, or that he doesn’t have an ability to pay.

In Korn v. Korn, the payor, who was also an undischarged bankrupt, owed his ex 3.6 million dollars in spousal support which was to paid in a series of lump sum instalments. In his bankruptcy, his wife was listed as one of his creditors and, like any other spousal support obligation, this obligation was not extinguished by his bankruptcy. However, after making two instalments, the payor brought a motion to reduce the support owing. The wife had sought to have the support enforced through the Family Responsibility Office (FRO won’t enforce equalization payments, only spousal support).

The wife tried to have the outstanding payments characterized as an equalization claim to prevent the payor from being able to bring a motion to have the amount of support varied. In denying her request, the court concluded that once a payment is characterized as spousal support, you can’t turn around and argue that it’s an equalization payment to circumvent the right of a payor to seek to have the amounts reduced. The recipient shouldn’t be allowed to benefit from the preferential treatment given to spousal support in both bankruptcy claims and the enforcement mechanism of FRO, and then, when it is no longer in her interests, argue that the amounts are not actually support, but constitute an equalization.

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