If your financial situation becomes unbearable, bankruptcy and consumer proposal are effective and powerful solutions to relieve the pressure from your creditors. However, it is crucial to understand that not all debts can be discharged through these processes. Here, we will break down the different types of debts that are excluded in the context of bankruptcy or a consumer proposal.
What is a Non-Dischargeable Debt?
Simply put, a non-dischargeable debt is one that cannot be erased even after declaring bankruptcy or making a consumer proposal. You remain legally obligated to repay these debts, even after being discharged from bankruptcy.
Non-dischargeable debts are described in Section 178(1) of the Bankruptcy and Insolvency Act (BIA).
The Main Non-Dischargeable Debts
1. Fines, Penalties, and Offenses
Debts resulting from penalties or offenses under a law are non-dischargeable. This includes parking tickets, speeding fines, and any other penalties imposed by a court. Regardless of whether you have filed for bankruptcy or a proposal, these debts must be paid.
2. Alimony Payments
Obligations for alimony payments (child or spouse support) arising from court decisions are non-dischargeable. The BIA stipulates that the terms of the support agreement must be respected before, during, and after a bankruptcy or consumer proposal. Arrears in support payments also remain payable.
3. Fraud, Misrepresentation, Embezzlement, and Defalcation
Debts related to fraudulent acts, misrepresentations, or embezzlement of funds are non-dischargeable. If a court finds you guilty of such actions, you must repay the associated debts, whether it involves undeclared income or wrongfully received benefits.
4. Student Loans
Student loans are subject to specific conditions. To be discharged from a student loan through bankruptcy, a period of seven years must have elapsed since the end of your studies. If this period is not met, these debts remain payable. Exceptions can be granted by a court in certain cases.
5. Damages in a Civil Case
Damages awarded by a court for intentionally caused bodily harm or sexual assault are non-dischargeable. Even in the case of bankruptcy or a consumer proposal, you must pay these damages according to court decisions.
Need Help?
Bankruptcy and consumer proposals offer ways to relieve many debts, but certain financial obligations remain unavoidable.
Understanding non-dischargeable debts is essential to develop a realistic financial strategy and avoid unpleasant surprises.
For personalized support and advice tailored to your situation, we invite you to consult with us, free of charge and without obligation.
Licensed Insolvency Trustees are your best allies in navigating these procedures and helping you find the most appropriate solution for your financial situation.
