What Kinds of Debts are Not Covered in a Bankruptcy in Canada?


When you are not in a position to settle your debts, you simply go ahead and file for bankruptcy. However, all the types of debts are not being covered when you file for bankruptcy. Hence, it is important for you to have a clear understanding on what debts are covered and what debts are not covered at the time of filing for bankruptcy.

It is also possible for you to go ahead and file for bankruptcy without seeking the assistance of a legal professional. If you are going to do that, you need to be well-informed about the process. That’s why you need to take a look at the debts mentioned below and understand that they are not being covered in a bankruptcy within Canada. As a result, you will be able to stay away from filing for bankruptcy unnecessarily within the country.

  • Student loans

In Canada, student loans will not be covered in a bankruptcy, as long as they less the 7 years old. It has been identified that most of the students living in Canada go ahead and obtain student loans. That’s mainly because education is so expensive in Canada and the students find it as a difficult task to cover up their expenses. However, you need to keep in mind that the student loans are not covered in a case of bankruptcy. If you are not in a position to settle your student loan, you shouldn’t go ahead and file for bankruptcy. It will not be able to provide any assistance to you. Student loans in Canada can further be divided into several categories. They include privately lent student loans, federal student loans and loans that are directly offered by the colleges. All these types of student loans will not be covered during a case of bankruptcy.

However, there is one exception, which you need to keep in mind. If you can prove that you are not in a position to work after your college or again in your life, due to a permanent or a complete disability, you will be able to include your student loan in the bankruptcy and file for it. But in general, people are not allowed to go for it.

  • Secured debts

There are individuals who purchase valuable items, such as cars, merchandise or jewelry. After purchasing these items, they go ahead and file for bankruptcy. This can be considered as another major mistake that they do. That’s because you will not be able to file for bankruptcy because of the items that you have purchased. If you are filing for bankruptcy, you will either have to continue making your payments for the lender or to give up the items that you have purchased.

You need to keep in mind that the lender of the loan has got a security interest against the item that you have purchased. In other words, you have come into an agreement with the lender in order to pay for the product in return of the item. In case if you fail to work according to that agreement, the right that you have to continue with using the item would be removed. Hence, you need to think about this factor at the time of filing for bankruptcy.

There is an exception in this situation as well. You will be able to surrender the merchandise, jewelry or vehicle you bought back to the lender. Then you will be able to get rid of the obligation that you have in order to make a payment back. You will not be allowed to keep an item along with you. The security interest of the lender can be considered as the main reason behind the above mentioned fact. Therefore, you will not be able to retain the item and stay away from making a payment to it.

  • Child support

Luckily, you will not be asked to remove the legal obligations that you have to pay for your child as a support at the time of bankruptcy. If you have an outstanding balance, which you are willing to use as this payment, you will be provided with the ability to keep it after the case.

  • Credit card debt and legal payments made to the ex-spouse

If you take a look at the divorce cases, the spouse usually agrees to make a payment for the legal expenses. Or else, the spouse will agree to make a payment against the outstanding debts that are owed by the partner. These debts are in a position to provide a tremendous assistance to you with surviving your bankruptcy.

You can go ahead and come up with an agreement in order to pay the credit card balance that is against your name. Then you can nominate your spouse as the person who makes that payment. Then you will not be able to turn around then proceed with filing for bankruptcy. That’s because filing for bankruptcy will not be able to help you settle of those agreements to make the payments or the debts. Your spouse is still in a position to force you and to tempt you in order to make the payments.

The process of rebuilding your credit can be a long and a frustrating one. If you go blind in this process, you will have to deal with a series of negative consequences. Therefore, you should stay informed and start rebuilding your credit slowly.

  • Court ordered restitution

Last but not least, you must understand that court ordered restitution is not covered when you file for bankruptcy in Canada. If you don’t know, restitution is the amount of money that the court will ask you to pay, because of a personal injury or a financial loss that you have done for another party. Since you are guilty in this case, you will not be provided with any relief when you are filing for bankruptcy. Any help for financial problems contact gtacredit.com or call 416 650 1100



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