How Are Family Creditors Dealt With In A Bankruptcy

2008-07-30   minute read

Once a person files for bankruptcy, a "Stay of Proceedings" is in force and all creditors are stopped from being able to sue that person.   This includes the ability of your family members to pursue your wife. If she obtains a "Discharge" from her bankruptcy, the debts will be written off.  The exception would be if they have a claim which falls under Section 178 of the Bankruptcy & Insolvency Act.  This section of the Act outlines which types of claims may survive a bankruptcy.  Unless your wife has done something fraudulent in obtaining this credit, a general loan from someone is not going to survive a bankruptcy. So your family needs to monitor her bankruptcy process to determine if she is going to get a Discharge.  Notices should have been sent out by the Trustee, and your family members should have received copies.  Assuming they have sufficient backup to verify their claim against her, they should file a "Proof of Claim" in her bankruptcy.   Ensure they mark the Claim form to ask for copies of Reports which will be sent out by her Trustee.  This will enable them to know when and if she obtains a Discharge.  It will also allow them to receive their portion of any funds that may be distributed in her bankruptcy (the dividends). If she obtains that Discharge, their debts are legally written off against her (unless they can pursue her for a claim under Section 178). Feel free to contact one of our Trustees in your area if your family has questions about their claims and whether or not they could survive a bankruptcy. Donna Carson, CGA, CIRP, Trustee Calgary, Drumheller, Airdrie regions

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