What Happens to Debts After Filing Bankruptcy?

There are many different reasons that consumers turn to bankruptcy, and the results will be the same for all of them. When an individual successfully completes the requirements of a bankruptcy they are able to have peace of mind since their unsecured debts will have been, as well as having a clean slate of their future financially.

Bankruptcy is not going to eliminate all of your debts. Furthermore, you are still going to be responsible for any secured debts you may have, like vehicle loans, mortgages, judgments’ against you, and legal fines you have accumulated. A personal bankruptcy will require you to give up some of your assets, which is to give the bankruptcy trustee who will make sure that the creditors receive something on what is owed them and for exchange of some of your debts eliminated, letting you have a clean start financially.

What it means is that you will no longer be responsible for your unsecured debts, and in some circumstances, you may not have to pay on some of your unsecured debts either. You may not have to pay back on some secured debts due to the lender might have already reclaimed the asset in question. For example: You no longer would have to pay a mortgage if the house was repossessed.

Prior to filing bankruptcy, it would benefit you to have a good understanding about what is going on with your debt at the time of your bankruptcy discharge. This will benefit you because you will have more knowledge about what a bankruptcy is going to cost you in Canada and it will also help you to make better choices in the future where your finances are involved so you do not rush into anything. Once you take into consideration what is going to happen with your debts during a bankruptcy, it may turn out that a bankruptcy is exactly what you need. However, it may turn out that one of the other debt relief options would work best for your needs, whether that is a consumer proposal, a debt settlement program, a debt consolidation loan, or consumer credit counseling.

Bankruptcy and Discharged Debts

You can have all of your unsecure debts forgiven in a bankruptcy, with a few minor exceptions. It may only take nine months, but can take up to 24 months or longer once you have filed. If you do not have any assets worth mentioning, the creditors you owe might decide to just walk away. Otherwise they are going to want to get something towards what you owe them and they realize they will not get the full amount.

At the time of the discharge, you will no longer owe on any of the following things:

  • Student loans – If you it’s been over 7 years since being a full time student
  • Medical bills that were past due, including any insurance premiums
  • Utilities bills that are past due, this include water, sewage, telephone service, electric, gas, internet, and cable
  • Payday loans
  • Other unsecure loans
  • Lines of credit
  • Personal consumer loans
  • Credit cards

Non-Discharged Debts

As previously mentioned, sometimes there will be debts, including fines that that are not eliminated in the bankruptcy.

Two main categories:

Secured Debts

There is a key difference in a bankruptcy and a consumer proposal which is that after fulfilling the consumer proposal, the creditors are not allowed to come after your assets. With the exception of specific exemptions and in the meantime you will be required to give-up some secured assets because this is in turn of having your debts forgiven. For instance, the bank that holds a mortgage on your house is not going to sit by and let you have them eliminated; they will just repossess your home.

Judgments’ and Legal Fines

Neither the government nor the legal system are going to look away after you file for bankruptcy. You are still going to be responsible for specific judgments’ that were imposed on you prior to when you went bankrupt. Alimony, fines that were imposed and require restitution, child support payments, any payments which were ordered due to a fraud conviction, amounts overpaid to the government related to taxes all will still be your responsibility to pay when the bankruptcy is discharged.

Student Loans

Education loans cannot be discharged unless it has been more than 7-years since you were a student.

Prior to Filing Bankruptcy

Prior to filing bankruptcy it is wise t o be more informed regarding this debt relief option as well as any others there are which may be beneficial and available to you. For instance, there are debt settlement programs that help in eliminating debts and they do not force you into giving up your assets. If you want more information regarding your options simply fill out the Canadian debt relief application.

BANKRUPTCY

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