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What is non-dischargeable debt?

It’s often said that filing for bankruptcy or submitting a proposal to your creditors resets the clock. While that is true, there are some debts may survive the process. These debts are called “non-dischargeable debt,” and are defined by Canada’s insolvency laws. Keep reading to learn what constitutes non-dischargeable debt.

So, first: Why does some debt outlive bankruptcy? Here are some of the reasons:

    To protect vulnerable creditors
    To prevent abuse from debtors
    To guarantee the execution of court-imposed penalties

List of Non-Dischargeable Debt

In section 178, the Bankruptcy and Insolvency Act provides complete list of non-dischargeable debt. Here are the five categories:

    Spousal or child support
    Court-imposed penalties (traffic tickets, fines, restitution in criminal cases)
    Civil damages for personal injury, wrongful death, or sexual assault
    Student loans, if the debtor has attended school anytime in the last seven years
    Civil or criminal fraud (use of credit shortly before insolvency, an act of fraud for which a court order has been made)

These debts will survive, except in the rare case in which a creditor explicitly waives their rights in a consumer proposal.

If there is a large amount of non-dischargeable debt, the Bankruptcy and Insolvency Act can be used to reduce the burden of other debts, allowing the individual to pay down their non-dischargeable debt.

Thinking of filing for bankruptcy? Would you like to have an accurate picture of your situation before deciding? Schedule an appointment with a Licensed Insolvency Trustee from Beaudin Groupe Conseil.


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