Consumer insolvencies in Canada increased by 9.8% in the 12-month period leading up to January 2020.
If you’re thinking about filing for bankruptcy, it’s critical to understand what the process entails and which debts can and cannot be discharged.
In this article, we’ll look at 5 debts that cannot be included.
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Top 5 debts the bankruptcy can’t discharge
Bankruptcy eliminates debts owed to unsecured creditors, but it isn’t always possible to go through bankruptcy and emerge with no debts.
There are exceptions, which cannot be discharged by bankruptcy, including:
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Child support
Child support cannot be included in a bankruptcy.
If the court has instructed you to pay child maintenance, you will be required to continue making payments, regardless of whether or not your bankruptcy is discharged.
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Alimony
Alimony is a legal obligation, which involves paying your spouse or partner.
Like child support, alimony is not discharged by bankruptcy.
You will be required to pay alimony during and after the proceedings.
Both child support and alimony are not subject to a stay of proceedings, so you must continue to make payments during the bankruptcy period.
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Debts related to fraudulent activity
If you have incurred debts through fraudulent activity or misrepresentation, you will not have these debts discharged through bankruptcy.
Creditors have a legal right to object to the discharge of your bankruptcy if they believe that you have provided inaccurate information or your conduct is suspicious, for example, you made a series of payments on a credit card before filing for bankruptcy.
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Parking fines and court charges
If you have been issued with a parking fine or you’ve been ordered to pay charges in court, you will still need to pay these debts.
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Student loans (loans that are less than 7 years old)
If you have a student loan, and it is less than seven years old, this debt will not be automatically included in your bankruptcy discharge.
If you have student debts that are recent, there may be better solutions available to you than bankruptcy.
The average student in Canada finishes college with debts of over $26,000.
Are there alternatives to bankruptcy?
Bankruptcy can be beneficial for some people, but it is usually considered a last resort.
If you’re in debt, and you’re unsure whether you’ll be able to pay it back, it’s wise to seek expert advice.
There are ways of reducing and consolidating debt and you may not need to file for bankruptcy.
Summary
Bankruptcy is a means of eliminating debts you cannot afford to pay off, but it doesn’t cover all kinds of debts.
There are exceptions.
If you need advice, or you have questions about how bankruptcy works or which debts are included, our expert team is here to help.
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
