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Debts Not Erased in Bankruptcy

What Debts Are Not Erased In Bankruptcy

If you decide that bankruptcy is your best option, your trustee will file the forms with the Office of the Superintendent of Bankruptcy and the administration of your file begins.

After you are discharged from bankruptcy you are legally released from any obligation to repay most of the debts you had at the time of filing for bankruptcy. Discharge from bankruptcy erases your unsecured debts, though there are some exceptions. Bankruptcy does not erase your secured debts if you have chosen to keep the asset and continue payments, such as car or mortgage payments.

It’s essential that you know which of your debts are secured debts. Your trustee will be able to confirm this.

Secured debts

With secured debts, your lender has a security against your property, such as a house or car. Equity in your property will be included in the calculation of your assets.

Unsecured debts

With unsecured debts, your lender does not have collateral and cannot continue the collection process after you have been declared bankrupt.

Debts not erased in bankruptcy

Some debts remain even after you are discharged from bankruptcy. These debts include:

  • spousal support (alimony) and child support payments
  • student loans if you have been a part time or full time student within the last 7 years (please note, under certain conditions the court can reduce this to 5 years)
  • government overpayments – your licensed insolvency trustee will advise you which overpayments are obliged to be repaid
  • court penalties or fines (this includes parking tickets)
  • court awarded damages
  • debts arising from fraud or theft

Debts erased in bankruptcy

Generally, other then the debts listed above, almost all debts are dischargeable in bankruptcy. Including:

  • unsecured lines of credit
  • personal loans
  • credit card debt
  • bank account overdrafts
  • income tax arrears
  • HST and GST owing
  • unpaid bills such as medical bills; insurance premiums ; cable and telephone bills (if you no longer intend to use these services)
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