Investment Losses and Bankruptcy

September 28th, 2006 by Questions

I am in a unique situation.
I used my student line of credit ($100,000) to make investments in stocks. I had made about $150,000 in profit in 3 months.

Unfortunately, I sold (by accident) one of my stocks during a time, when no brokerage house was allowed to trade it (due to a reorganization). But TD Waterhouse cleared the transaction anyways. Only a month later, when they realized their mistake, did they forcefully correct it (for me and 30 other clients in Canada), leaving me with a $120,000 negative cash balance, and holding me fully liable.

Then they froze my brokerage account, and liquidated my $250,000 portfolio for pennies.
Now I still owe $100,000 to TD, and $100,000 to my student line of credit.
I have no other assets or money left.

A lawfirm is interested in helping me sue TD Waterhouse, but I can’t afford it, and fighting a Bank, I’d probably lose anyways.

My questions are:
1. If I declare bankruptcy, will this erase both the debt on my brokerage account AND my student line of credit??

2. Can TD Waterhouse sue me for the $100,000 once I declare bankrupcy?

3. Once I am in bankruptcy, can I still sue TD Waterhouse if someone lends me money to do so?

Questions

One Response to “Investment Losses and Bankruptcy”



September 30, 2006 at 12:37 pm, A licensed trustee said:

Your situation is complicated, so I would suggest you consult a lawyer for a complete answer. In general, the answers to your questions are:
1. if you declare bankruptcy your debts are discharged. If your student line of credit is acutally a government guaranteed student loan, it is only discharged if it is more than 10 years old.
2. no-one can sue you once you go bankrupt, unless they get permission first from the bankruptcy court (which is very rare).
3. you can sue someone while bankrupt, but if you win, the proceeds would go to your trustee, who would then distribute them to your creditors.

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