What Debts Are Released In A Bankruptcy

There seems to be much confusion in Canada about what debts are released, or not released, in a bankruptcy or proposal. In part, I think that this is because people reading web pages on bankruptcy often find information on US bankruptcy laws, which are quite different. Basically, you are released from ALL the debts that you owe on the day that you file, with two exceptions: a) If you keep an asset that has secured debt on it, like your house with a mortgage, or a car with a car loan, you will have to continue making the payments on this debt. You either pay your mortgage, or your house will be foreclosed. If you do NOT keep the asset, then the debt will go away with the asset - in other words any shortfall on a secured debt IS included in a bankruptcy or proposal.   b) There are certain debts that the Bankruptcy and Insolvency Act says are not released. They are: i)   Fines or penalties imposed by a court of law; ii)  Alimony and Child Support; iii) Debts incurred through Fraud or Misrepresentation; iv) Damages for Assault awared by a court; and v)  Student Loans, unless you have been out of school seven years (just dropped       from ten) at the date the bankruptcy/ proposal is filed. Therefore debts for things like income tax ARE released in a bankruptcy or proposal, as are damages awarded against you in car accident and so on. To be clear, any creditor can object to a person getting out of bankruptcy, and the court may impose conditions on an individuals discharge (release) from bankruptcy, but the law as it stands is relatively straight forward. As always, we encourage you to consult with one of our insolvency team if you require further information, or wish to discuss your particular situation in one of our free intitial consultations. Ian Schofield MNP Regina