Are Secured Claims Eliminated if I File for Bankruptcy?

Understanding Bankruptcy: Are Secured Claims Included?

‍Struggling to keep up with bill payments and constantly dodging collection agencies can take a toll on anyone’s mental peace. If you find yourself at this crossroad, considering bankruptcy might become a plausible solution. However, a common question that arises is: Are secured claims eliminated if I file for bankruptcy? Let’s delve into this topic to provide a clear answer.

The Reality of Bankruptcy

Contrary to popular belief, bankruptcy does not completely wipe out all your debts. The types of debts that can be eliminated are specific and contextual. Hence, it’s critical to understand the intricacies of your financial situation and the nature of your debts before choosing to file for bankruptcy.

To help you navigate through this maze, reaching out to a Licensed Insolvency Trustee (LIT) is advised. These professionals can provide insights into your secured and unsecured claims, offering guidance on whether bankruptcy is a viable option for you.

Creditors: An Overview

Before we delve into the impact of bankruptcy on debt elimination, let’s understand the key players involved – the creditors.

Secured Creditors

A secured creditor is one who lends credit backed by tangible property, known as collateral. If you default on a loan, the secured creditor can recoup their losses by seizing this collateral.

Secured loans can include a mortgage (with the house as collateral) or an auto loan (with the vehicle as collateral). The benefits of secured loans are generally lower interest rates and higher borrowing limits, with the downside being a more thorough approval process.

Examples of Secured Credit


  • Mortgage.
  • Home equity loan.
  • Home equity line of credit (HELOC).
  • Auto loan.
  • Equipment loan.
  • Secured credit card.

Unsecured Creditors

On the flip side, unsecured creditors lend credit without any collateral. If a borrower defaults, they cannot seize any property to recover their losses. This risk is usually compensated by high-interest rates. Unsecured loans are typically quicker and easier to obtain.

Examples of Unsecured Credit


  • Student loans.
  • Personal loans.
  • Unsecured credit card.
  • Payday loans.
  • Unpaid bills.

Secured vs Unsecured Claims in Bankruptcy

When contemplating bankruptcy, it’s crucial to understand that secured claims are typically not included. For example, if you have a secured car loan and file for bankruptcy, the lender has the right to repossess the car to recover their losses. But if you continue making your car loan payments after filing for bankruptcy, you can keep the car.

On the other hand, most unsecured debts can be wiped out in bankruptcy. These could include:


  • Credit card debts.
  • Retail store cards.
  • Line of credit.
  • Bank loans.
  • Payday loans.
  • Installment loans.
  • Individual loans.
  • Past due bills.

Debts that Bankruptcy Can and Can’t Clear

Despite bankruptcy’s ability to eliminate most unsecured debts, some unsecured debts cannot be waived. These include:


Student loans: If you’ve been out of school for less than seven years, bankruptcy doesn’t clear your student loan debt. If you’ve been out of school for more than seven years, your student loan can be eliminated.

Child support or alimony: Bankruptcy does not absolve you of making child support or alimony payments.

Court fines and penalties: Fines or penalties imposed by the court are not eliminated.

Debt due to fraud: Debts accrued through fraudulent behaviors are not cleared in bankruptcy.


Discussing Your Options with a Licensed Insolvency Trustee

Bankruptcy is a significant decision that is often the last resort for individuals unable to find a way out of their financial predicaments. While it can seem daunting, bankruptcy can provide a fresh financial start.

If you have a substantial amount of secured debt, bankruptcy won’t absolve you of all your financial obligations. However, it can help alleviate your unsecured debts, freeing up resources to pay off your secured creditors.

A LIT can discuss your debt management options with you. In some cases, a consumer proposal might be a better solution than bankruptcy. If you’re overwhelmed with student loans, credit card debt, and unpaid bills, consider reaching out to a LIT to discuss your options. They are the only professionals authorized to administer bankruptcy proceedings in Canada.

Filing for bankruptcy doesn’t mean you have to navigate these troubled waters alone. Reach out to a professional like Bankruptcy Canada for a no-obligation consultation and take the first step towards regaining control of your financial life.

So, to answer the question, Are secured claims eliminated if I file for bankruptcy? No, they are not. But bankruptcy can offer a lifeline to those drowning in unsecured debts, offering them a fresh start and a chance to regain their financial footing.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.