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.
Debts Included in Bankruptcy Are Not Always Discharged
Many people are also not aware that creditors, their bankruptcy trustee or the Office of the Superintendent of Bankruptcy (OSB) have the option to oppose someone’s discharge from bankruptcy. There are certain bankruptcy rules that need to be followed.
If this happens, your trustee will explain the process to you. This could be a time when you would be required to attend a meeting to provide more information or be examined under oath. The outcome of the examination will determine what happens to the debts included in the bankruptcy estate. There may be conditions that someone needs to meet before they are able to obtain their bankruptcy discharge.
Contact Us for More Information About Which Debts Can Be Included in Bankruptcy
Know which debts are secured (can’t be included) and which debts are not secured (can be included) if you decide to go bankrupt.
If you are struggling to pay your bills and aren’t sure if filing for bankruptcy will help get rid of your debts, get help determining your options. One of our Credit Counsellors will answer your questions and provide you with guidance and information so that you can make an informed decision.
Our appointments are free, confidential and don’t obligate you to anything. Make an appointment today with a Credit Counsellor by phone at 1-888-527-8999, by email, or chat with us online. We will give you more information about bankruptcy, secured and non secured debt. We will also explore bankruptcy alternatives with you or refer you to a trustee. Either way we will help you decide what the best debt solution is for you. Knowing how to handle your situation will give you peace of mind and help you to worry less.