Debts not eliminated in a bankruptcy

Debts You Don’t Lose in Bankruptcy

Secured debt may not be eliminated, you do have a choice whether to keep the asset or surrender it in a bankruptcy.

Unsecured Debt in Bankruptcy

When you file for bankruptcy unsecured debt is eliminated.  Unsecured debt are loans or credit debt for things like:

  • credit cards debt
  • debts from leases and contracts
  • personal loans, that are not secured
  • Utility bills, like phone, hydro, electrical

These debts which are unsecured by any real property are normally eliminated in a bankruptcy versus debts that are secured or specifically not excluded in the Bankruptcy Act.

Debts to Government Agencies

Where a debt is owed to a government agency usually the debt is not discharged in bankruptcy

  • certain tax debts,
  • fines, court penalties
  • child support and alimony
  • debts incurred due to fraudulent acts
  • debts where the bankrupt was found responsible for death

There can be exceptions to these debts to which we can discuss your case in more detail when you meet with us.

★★★★★ The taxes owed to the CRA were at the point where I knew the CRA was going to put a lien my home.  I contacted YanchDey and we did the bankruptcy which stopped the CRA saving me thousands. Thanks Again P. Vorvis Ajax.

Debts Petitioned by Creditors

Where the bankrupt has taken on a debt within 60 days or less of filing for bankruptcy a creditor may approach the court and make an application for a debt not to be considered in the bankruptcy.  These could include such issues as;

  • cash advances
  • credit card purchases for luxury items
  • debts

The reasoning for this action is the court and creditors may believe that the bankrupt knew that they were going to file for bankruptcy.

The bankrupt then made purchases or received cash advances believed they could benefit from it.

Taxes and Bankruptcy

Taxes owed to the Canadian Revenue Agency (CRA) are usually considered as unsecured credit and are able to be discharged in a bankruptcy with exceptions.  The exceptions are;

  • the tax liability is under 200,000 dollars
  • the tax liability is more than 75% of your unsecured debt

Where the bankrupt reaches these thresholds the matter must be brought before a judge, who will decide upon the conditions for the debt before it may be discharged, which may included making a payment towards the debt.

While there is outstanding taxes owing the CRA can withhold payments for:

While there are taxes owing the CRA can garnishee any paycheque to give notice to the bank to have bank accounts seized or payments taken from.

Where you believe that you have outstanding taxes owing and you own property, it’s very important that you contact our offices to discuss your situation BEFORE the CRA register a lien.

Tax Debt and Your Home

Where there is tax owed to the CRA and the CRA has registered a lien on the home, the lien becomes a secured debt.

When the CRA places a lien on your home it means that the debt cannot be discharged through bankruptcy.

The bankrupt must either sell the home and pay the debt or make the payments as if a mortgage has been placed upon the home.

Speak to an Insolvency Trustee

Bankruptcy Trustee Kelly Dey
Kelly Dey Insolvency Trustee

Questions about insolvency and bankruptcy? I invite you to call our office to speak to myself or one of our insolvency trustees.

We’re happy to speak over the phone or in-person at one of our offices.

Where you have questions or need some advice, please feel free to give us a call without cost or obligation.

Call us today at 905-721-7506.

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