Unsecured & Secured Debts in Bankruptcy – Some Debts Remain
Secured vs Unsecured Debts in Canadian Bankruptcy – The bankruptcy process in Canada allows someone to obtain a discharge for their unsecured debts. They are allowed to retain some specific assets, but bankruptcy does not discharge secured debts like mortgages (foreclosure) or car loans.
Not all debts can be included in bankruptcy, e.g. secured debts will survive a bankruptcy because they can not be included. Unsecured debts, which some people call non secured debts, can however be eliminated. Here is a list of different types of debt that will survive a bankruptcy:
- Student loans that are less than 7 years old (if loans are between 5 and 7 years old, the trustee could make a hardship application to have them included)
- Child support payments or arrears
- Spousal support / alimony payments or arrears
- Court ordered fines and restitution payments
- Debts resulting from fraudulent activities
Government overpayments (e.g. if you were paid too much in EI benefits) could also be included on the list above. While it may be possible to have these debts discharged in bankruptcy, if the government believes the overpayment was the result of fraud or misrepresentation (such as not disclosing all your income), they may still take action to recover the funds (such as withholding tax refunds or other federal payments). They may even be able to prevent the debt from being included in the bankruptcy in the first place.