What Happens To My Debt When I Claim Bankruptcy in Canada?
Consumer debt results in bankruptcy due to many causes, but the outcome is similar to each individual who undergoes bankruptcy. If you are discharged from bankruptcy, you can eradicate your unsecured debts and start building a better financial foundation.
The Truth Behind Bankruptcy
Bankruptcy cannot get rid of your entire debt as much as you want. Besides, it does not wipe out your secured debts; you will still be obliged to pay off your mortgage or car loan if you have one. Moreover, bankruptcy does not excuse you from paying child support or other legal fines that you are imposed.
In the case of personal bankruptcy, you will have to surrender your assets to compensate for your debts. By doing so, you are no longer accountable for either your unsecured or secured debts. Although they may sound compelling, the reason why your payment for secured debts is no longer needed is that the bank or the lending institution has repossessed your property.
Thus, before taking a big step in filing for bankruptcy, it makes sense to get a clear view of what will happen to your debt upon your discharge. Besides, knowing its pros and cons will give you an idea of the massive cost of bankruptcy in Canada. Moreover, it is better to weigh things first before stepping into a big decision in your life. Granted the awareness about your debts during bankruptcy, you may then pursue filing if you feel that your situation best suits the idea.
On the contrary, knowing the pros and cons of bankruptcy, you may consider pursuing other debt-relief alternatives; the impact of a consumer proposal, debt consolidation, consumer credit counseling, or debt settlement are way acceptable to bear than bankruptcy.
Debts Discharged in Bankruptcy
You’ll be free from your unsecured debts with a few exclusions, regardless of your bankruptcy discharge timeline. Bankruptcy discharge could occur within 9 to 36 months or longer. During the process, your creditor will either be paid in full or a portion of your debt; one thing is for sure that they will get a just compensation of what you owe.
During Bankruptcy Discharge, you will no longer accountable for any unsecured debts such as:
• Credit card including retail store cards
• Payday loans
• Personal consumer loans that are not secured by assets
• Unsecured lines of credit
• Unpaid medical obligations and insurance premiums
• Income tax and Utility taxes
• Unpaid utility bills such as electricity, water, and cable or internet service
• Student loans if over seven years have passed since your ceased being a student
Debts are NOT Discharged in Bankruptcy
Your debts that will remain even after you file for bankruptcy in Canada can be divided into two major classifications:
Legal Fines and Judgments
Your obligations for legal fines or enforced judgments will still remain even when filing for bankruptcy. Any unpaid obligation to the government on your income taxes or payments for child support is some examples of the obligations that you’re still liable to pay after bankruptcy.
Secured Debts
The big distinction of bankruptcy from a consumer proposal is that your creditors will not have the chance to seized your assets when fulfilling the condition of a consumer proposal. On the contrary, you will have to surrender secured assets apart from what exempts to be forgiven from your secured debts.
Student Loans
Your student loans will not be discharged in bankruptcy provided its less than 7 years since your ceased being a student.
You are will still be liable for the following debts after bankruptcy discharged:
• Some types of tax claims,
• Debts that are not set ahead by the borrower on the lists and schedules the debtor must file with the court
• Spousal debts or child support or alimony,
• Claims for willful and malicious injuries to person or property
• Obligations to governmental units for damages and penalties
• Government-funded or secured educational loans or benefit overcharges
• Debts for personal injury such as a surgical procedure for motor vehicle accidents due to intoxication
• Debts to certain tax-advantaged retirement plans
• Debts for a certain condo or cooperative residence expenses
