Debts Not Discharged by Personal Bankruptcy in Canada

Experiencing financial turmoil and considering bankruptcy can be a challenging period. In Canada, filing for personal bankruptcy is a legal process that offers relief from most debts. But, it’s essential to understand that not all debts are wiped clean. This article will delve into the intricate details of debts not discharged by personal bankruptcy in Canada.

Understanding Bankruptcy

Before we explore the specifics, let’s understand what bankruptcy is. Personal bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act, where individuals who cannot pay their debts surrender their property to a Licensed Insolvency Trustee. The trustee then sells these assets to repay the creditors.

Types of Debts

Debts fall into two general categories:

  1. Secured Debts: These are debts where the lender has some sort of security, such as a mortgage or car loan.
  2. Unsecured Debts: These are debts without collateral, like credit card debt.

Bankruptcy mainly deals with unsecured debts. However, there are exceptions. Let’s explore these debts in detail.

Debts Not Discharged by Personal Bankruptcy

Though bankruptcy can provide a fresh financial start, some debts remain untouched. Here are the most common types.

Fines, Penalties, and Restitution Orders

Any fines or penalties imposed by the court, such as traffic tickets, parking fines, or restitution orders, are not discharged in bankruptcy. These debts must be paid in full, even after bankruptcy.

Debts from Bodily Harm, Assault, or Death

If you’re sued and a court awards damages against you for intentionally inflicting bodily harm, sexual assault, or causing death, these debts are not eliminated by bankruptcy.

Alimony and Child Support

Bankruptcy does not discharge any obligations to pay alimony, spousal support, or child support. These are considered protected debts.

Debts from Fraud or Embezzlement

Debts arising from fraud, misappropriation, or embezzlement while acting in a fiduciary capacity are not discharged. If you’re found guilty of fraudulent activities, the money you owe as a result will survive bankruptcy.

Debts from False Representation

Debts resulting from obtaining property or services through fraudulent misrepresentation are not discharged. For instance, lying about your income or assets to get a credit card can lead to such debts.

Government Student Loans

Government student loans are not discharged unless you’ve been out of school for at least seven years at the time of filing bankruptcy.

Impact on Credit Report

Bankruptcy will appear on your credit report for six years after your discharge. During this time, getting credit can be difficult and expensive. However, you can rebuild your credit by demonstrating good financial habits.

Final Thoughts

Filing for bankruptcy is a serious decision that can have long-lasting effects. It’s essential to fully understand which debts can and cannot be discharged by personal bankruptcy in Canada. Working with a Licensed Insolvency Trustee can help you navigate this process. Remember, financial setbacks are temporary, and with time and effort, financial stability can be regained.

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