Understanding Bankruptcy: Debts Not Erased
Declaring bankruptcy can be a daunting prospect, but it may be the most viable option for some individuals. When you file for bankruptcy, the administration of your account begins, and the Office of the Superintendent of Bankruptcy is informed. This process offers you legal protection from unsecured creditors, but it’s crucial to note that not all debts can be discharged through bankruptcy.
Debts Not Erased In Bankruptcy remain an obligation even after you’re legally released from most of your financial obligations.
Distinguishing Between Secured and Unsecured Debts
Understanding Secured Debts
Secured debts involve a tangible asset that acts as collateral. This could be a house, car, or other valuable properties. If you have chosen to retain the asset and continue with payments, bankruptcy doesn’t erase these debts. Therefore, understanding your debt landscape is crucial.
Grasping Unsecured Debts
Unlike secured debts, unsecured debts don’t involve collateral. The lender cannot continue with the collection process once bankruptcy has been declared. However, some varieties of unsecured debts persist even after bankruptcy.
Persistent Debts Post-Bankruptcy
Certain unsecured debts survive bankruptcy. These include, but are not limited to:
- Alimony and child support payments.
- Student loans if you’ve been a part-time or full-time student within the past 7 years.
- Overpayments owed to the government.
- Court penalties, fines, and awarded damages.
- Debts resulting from fraudulent activities or theft.
Your Licensed Insolvency Trustee will guide you on which overpayments need to be repaid.
Debts That Can Be Discharged
Apart from the debts listed above, nearly all other debts can be discharged when declaring bankruptcy. These include:
- Unsecured lines of credit.
- Personal loans.
- Payday loans.
- Credit card debt.
- Overdrawn bank accounts.
- Income tax arrears.
- HST and GST owing.
- Unpaid bills such as medical bills; insurance premiums; cable and telephone bills (if these services are no longer required).
By understanding which debts can’t be erased in bankruptcy, you can make an informed decision about whether or not declaring bankruptcy is the best solution for your financial situation. Always consult with a financial advisor or legal expert before making such a significant decision.
