A consumer proposal or a bankruptcy is a formal process under the Bankruptcy and Insolvency Act that allows people to get discharged from their debts that they owe to creditors. These are both great options for people who are struggling with a lot of debt and can’t find a way out on their own. By filing bankruptcy or making a consumer proposal, most of your debts will be covered immediately and all collection agencies will stop calling.
While most debt are covered, including tax, car loan, cell phone, credit cards, payday loans and consolidation loans, certain debts/obligations will survive the process and you will still be required to pay them. The five most common debts that would survive are as follows:
Student loans less than 7 years old: A consumer proposal or bankruptcy can only discharge student loans that are over 7 years old. If you have a student loan that is more recent than this, the debt will still be yours to repay even after completion of the process. If you have other debts, a consumer proposal or bankruptcy would eliminate these obligations possibly making it earlier to service your student loan debts.
Child support: If you have been ordered by a court to pay child support, a consumer proposal or bankruptcy will not affect this arrangement. You will be required to continue to make payments. As well, whatever payment arrangements you have will remain in effect during the process.
Alimony: Similar to child support, alimony or spousal support is not discharged in a consumer proposal or bankruptcy. Even after completion of your bankruptcy, you are not released from spousal support payments.
Debt related to fraud or misrepresentation: Any debts accumulated as a result of fraud will not be discharged through a consumer proposal or a bankruptcy. For example, if prior to your consumer proposal/bankruptcy, you racked up expensive charges on your credit cards (with no intention of paying these debts back), your creditors can apply to have this debt excluded from your discharge.
Court-imposed fines: If you have been fined in a court of law, you will have to pay the fine regardless of your consumer proposal or bankruptcy.
If you are struggling with debt and need help, contact us for a free, no-obligation consultation. We will be able to let you know what debts are covered in bankruptcy and guide you in the path that best suits your situation.
