There are many different reasons why a debtor who needs to file a personal bankruptcy asks if certain debts can be excluded from their filing.  A couple of reasons I hear often are:

  • The loan is co-signed by another party and I don’t want the co-signor to be pursued for payments;
  • The debt is owed to a personal friend or family, and I feel a moral obligation to repay the debt;
  • I have been with the same bank for 20 years and have a loyalty to pay the credit card owing to my bank; and
  • I am concerned Canada Revenue Agency will audit if personal income tax debt is included in my bankruptcy.

The purpose of a bankruptcy is to give a debtor a fresh start by eliminating all unsecured debt.  The trustee realizes on non-exempt assets (investments, house equity, etc.), collects surplus income payments and reviews transfers/preferential payments that may have occurred in the last 1-5 years.  Unsecured creditors who file a proof of claim share equally in any funds the trustee distributes to your creditors.  Once you are discharged, a pre-bankruptcy creditor is unable to pursue you for payment of their debt (unless it survives under S178 of the Bankruptcy and Insolvency Act).

You must include all debts in your bankruptcy as no creditor is to receive preferential treatment above the others.

Contact a Licensed Insolvency Trustee at Taylor Leibow Inc. 1-888-287-2525 and we can help you get a fresh start now.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)