6 Debts left after a Bankruptcy or Consumer Proposal

For people struggling with debt, filing for Bankruptucy or a Consumer Proposal might be the best option. Both come with their own journeys and challenges but they can also be a path back to financial freedom. A Consumer Proposal or personal Bankruptcy can help you get relief from many types of debt including credit card debts, high-interest payday loans, old utility bills, and many other forms of credit.

What many people don’t realize is that there are some debts that aren’t erased or discharged upon the completion of a Bankruptcy or Consumer Proposal, according to Section 178 of the Bankruptcy and Insolvency Act.

Let’s take a look at 6 kinds of debt that will still remain after your Bankruptcy or Consumer Proposal.

1. Fines or penalties

Any fine, penalty, or restitution order imposed by the court. This includes speeding tickets and fines related to basic driving infractions. If you have outstanding fines going into your Bankruptcy or Consumer Proposal, you will still have to pay them after your discharge.

2. Damages

Any award of damages by a court for bodily harm intentionally inflicted, sexual assault, or wrongful death. Obviously, these are more serious criminal charges with larger consequences. When it comes to the financial restitution of these crimes, they are not erased by a Bankruptcy or Consumer Proposal.

3. Alimony and child support

Filing for Bankruptcy or a Consumer Proposal are supportive measures that give people a second chance. However, they are not intended to make someone else’s life even harder. If you have outstanding alimony or child support payments, you will continue to owe those regardless of being discharged from a Bankruptcy or Consumer Proposal.

4. Fraud

Debts arising from fraud and embezzlement will still remain after discharge — including obtaining property or services under false pretenses or other fraudulent misrepresentation. In some cases, governmental agencies may use this provision in an attempt to resume collection on “overpayments” for benefits such as social assistance or employment insurance. These types of debts should be discussed with a Licensed Insolvency Trustee to determine what, if any, issues may apply in your unique situation.

5. Liability from failure to report dividend

You will still owe for any liability for any dividend that a creditor would have been entitled to receive during the administration of your Bankruptcy or Consumer Proposal but did not because you didn’t report them to your Trustee.

If you forget to include a creditor and your Bankruptcy or Consumer Proposal is ongoing, you can contact your Licensed Insolvency Trustee and request that notice of the proceeding be sent to the party that was missed. Creditors can be added after the proceeding is underway provided the debt was incurred before the filing date of the Bankruptcy or proposal.

6. Student Loans

In some circumstances, student loans can still be owed after your discharge. Basically, a student loan survives a Bankruptcy or Consumer Proposal if it has been less than seven years since you were a student when you filed.

If you’ve completed your Bankruptcy or Consumer Proposal and the student loan debt survived, you still might be able to make a court application to have your student loan debt erased if:

• You have been out of school for more than five years
• You prove that you’ve acted in good faith in attempting to pay the loan
• You have or will continue to have financial difficulty that prevents you from paying off the loan

There is no guarantee that your an application will be successful as the court will consider the each case on an individual basis.

When debt repayment resumes

In many cases, creditors with debts that survive Bankruptcy or a Consumer Proposal will honour the stay of proceeding that is established when the insolvency proceeding is filed. In this case, you may not receive collection calls and/or payments may be stopped during the process. However, these creditors will most likely resume collection once you are discharged from Bankruptcy or complete your Consumer Proposal. But the stay of proceeding does not typically apply to the collection of child support arrears subject to a maintenance enforcement program.

Even those these debts will remain, a Bankruptcy or Consumer Proposal might make the most sense for you and your financial situation. The most important thing is to get support on your journey. If you are experiencing financial difficulty and are unsure whether certain debts can be extinguished in a Bankruptcy or Consumer Proposal, contact your local Licensed Insolvency Trustee for a free consultation.