Do I have to Include All my Debts in a Bankruptcy in Ontario?

The simple answer is yes, however that’s not to say all your debts will be affected or discharged by the bankruptcy.

There’s generally two types of debt – secured and unsecured. Although notified as part of the bankruptcy process, a secured creditor’s rights are not affected by a bankruptcy unless you are willing to surrender the asset pledged as security prior to filing the bankruptcy. You can turn a secured debt into an unsecured debt by giving up the asset. If you want to keep the asset (and the trustee has no interest in the asset), you can keep it, as long as you keep paying for it.

For the most part, all your unsecured debts (with a few exceptions noted below), such as credit cards, credit lines, loans, overdrafts, payday loans, even taxes will be included and discharged in a bankruptcy.

Can’t Leave Out Co-Signed Debts

Often people ask if they can leave out any co-signed debts so their guarantor won’t find out. Unfortunately the answer to this is no. Bankruptcy law requires that you list all of your creditors, not just those you want to.

A bankruptcy does not protect a co-signor (spouse, parent etc) unless that person also files a bankruptcy themselves. The reason why banks like co-signors or 2nd card holders on credit cards is so that if one file bankruptcy, they can still pursue the other.

Be Truthful

If you neglect to inform the trustee of a creditor, you may still be liable to pay that creditor an equal amount to what they would have received from the bankruptcy had they been given an opportunity to participate in the bankruptcy proceedings.

Failing to disclose information truthfully can also negatively affect your ability to obtain an automatic discharge from bankruptcy.

This is not the same however as accidentally forgetting to include a creditor in your bankruptcy filing. Errors and omissions do happen. The fastest way to get a comprehensive list of who you owe money to, you can obtain a copy of your credit report from either Transunion or Equifax.

Non-dischargeable Debts

Although you are required to include, and disclose, information about all of your creditors, some unsecured debts will not be discharged in a bankruptcy under bankruptcy law including:

• A debt arising out of fraud or misrepresentation – This can include government overpayments of Employment Insurance and Child Tax Benefits if they previously overpaid you because of incorrect information given to them about your earnings/family size.
• Spousal or Child Support and Alimony – Any debt owing for support will not be discharged in a bankruptcy and furthermore, it’s unlikely that any wage garnishment for a support deduction will not be stopped either.
• Court Imposed Fines – Any fine or penalty imposed by a court, such as parking fines, speeding fines, won’t be discharged.
• Student Loans (if it’s less than 7 years since you left school) – The key with student loans is how long you’ve been out of school. It’s not when you borrowed the money, it’s how long since you finished school. If after 7 years you’ve not found employment in the field you studied for, the government will be a little more forgiving with allowing the debt to be included in a bankruptcy.
• Restitution Orders – If you’ve been ordered to pay restitution, this debt will survive a bankruptcy.

It’s also worth noting that if you make payments to some of the above debts during the bankruptcy, then that will potentially reduce the amount of surplus income you’ll be required to pay. You’ll need to discuss this with your trustee in detail before you file.

If you’re concerned over any of the above debts, please talk to a bankruptcy trustee prior to filing a bankruptcy and they’ll be happy to go over any questions or concerns you may have so you can prepare accordingly.