Will Fraud Charges Survive Bankruptcy?

When you file for bankruptcy, provided that you meet your obligations, you will be awarded a discharge and released from your debts.

But there are certain exceptions to that and many people ask the question, will fraud charges survive bankruptcy?

If you are making a case against somebody that has committed fraud and they declare for bankruptcy, you may be concerned that they will no longer be obliged to pay the settlement.

However, that is not usually the case and most fraud charges will survive bankruptcy.

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The Bankruptcy and Insolvency Act lays out the rules and regulations around bankruptcy, and there is a specific clause that deals with situations like this. Section 178(1) of the Bankruptcy and Insolvency Act outlines certain debts that will not be written off when a bankrupt part is awarded a discharge.

Section 178(1) states:

An order of discharge does not release the bankrupt from:


(a) any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail;


(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;


This means that, in most cases, any debts that are required to be paid as a result of a prosecution for fraud will not be written off during the bankruptcy.

The case of Hoyle v. Gibson-Heath demonstrates how this clause works in practice.

Melissa Gibson-Heath, a full time administrator at a retirement home, was accused of stealing $229,000 from Clifford Hoyle, an elderly resident at the home.

She pled guilty to the charge and was sentenced to 18 months in prison.

The court also required her to pay $229,000 in restitution, minus any amounts recovered by the crown.

After Clifford Hoyle passed away, his family commenced civil action against Gibson-Heath, who filed for bankruptcy.

Although she was discharged of her other debts, the court ruled that she was still liable for the $229,000 outstanding in the restitution order.

So, if you are concerned about an outstanding restitution order and you are wondering, will fraud charges survive bankruptcy, you do not need to be concerned.

In almost all cases, fraud charges clearly survive bankruptcy and the amount will still be owed.

If you have your own debts as a result of a fraud conviction and you are unable to pay them, you will not be able to avoid the debt by filing for bankruptcy.

In that case, you will need to explore other debt relief options.

We can help you with any questions that you have about fraud and bankruptcy, or any other debt issues that you may be having, so get in touch today.

You can reach us by phone or fill out an evaluation form and we will get back to you.

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?

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