If I file for bankruptcy or make a consumer proposal, will all of my debts be discharged? (2024)

In short

When you file for bankruptcy or make a consumer proposal, your debts are discharged, including taxes, credit cards, late bills, lines of credit and personal loans. Under the Bankruptcy and Insolvency Act, only the following debts are not discharged:

• Fines, penalties or offenses
• Alimony and child support
• Debts due to fraud or misrepresentation
• Student loans, in some situations
• Damages under a civil case

Do you want to find out more about debts that are discharged? Ask our insolvency experts. They will help guide you in order to clear your debts!

When things get really tough financially and you’ve accumulated a lot of debt, personal bankruptcy or a consumer proposal are two solutions that can help you get your life back on track and on a solid footing. In a bankruptcy, you can clear all of the debts that can be discharged. This includes debts towards an individual, overdue bills (electricity, telephone, etc.), credit card debts, loans and your mortgage. Contrary to popular belief, tax debts can also be discharged.

Debts that cannot be discharged

It’s important to realize however that some debts cannot be discharged. Regardless of your financial situation, you must repay these debts, as stated in Section 178 of the Bankruptcy and Insolvency Act (BIA).

Here are the main debts that are not discharged:

Fines, penalties and offences

Debts resulting from violations of a law cannot be discharged. This could be a parking ticket or a speeding ticket.

Debts for alimony or child support

You must comply with the agreement that was reached after your separation or divorce. If you are behind in your payments, a bankruptcy or consumer proposal will only reduce the amount of money you pay on your debts and other monthly bills so that you have the funds to pay support.

Debt due to fraud, misrepresentations, embezzlement, collusion or breach of trust

If the court has ruled that you committed fraud, embezzlement, collusion or breach of trust, you must pay the related debts. This can be as common as unreported work income or unsubstantiated last-resort financial aid payments.

Student loans

Whether you took out a student loan for full- or part-time studies, seven years or more must have elapsed from the end of your studies and the date of your bankruptcy in order to be discharged from your student debt. If the period is less than seven years, the bankruptcy will not discharge your student debt.

Damages under a civil case

If you’ve been convicted in a court of intentional bodily harm or sexual assault, you’re responsible for paying the damages awarded as a result of the judgment despite a bankruptcy or consumer proposal.

In short, if you’re thinking of filing for bankruptcy or making a consumer proposal with your creditors, do not hesitate to call on our team of insolvency counsellors. Based on your specific situation, they will tell you the best way to discharge your debts and will help you differentiate between those that can be discharged and those that can’t.

A consumer proposal: one way to avoid bankruptcy

Bankruptcy is not the only solution to your financial problems. With a consumer proposal, you can pay off all or part of your debts over a period of time. This agreement with your creditors is set for a maximum period of five years.

If this is the best solution for you, your Licensed Insolvency Trustee will handle the negotiation and guide you through the process.

Don’t hesitate to come and meet with one of our counsellors who will guide you towards the right path to get out of debt.

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