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Do I Become Debt-free When I Declare Bankruptcy?

The short answer is “no”. When you declare bankruptcy in Canada, there are still some types of debt that you will need to pay later on.

The goal of declaring bankruptcy isn’t to create a clean slate and wipe your debt record, but instead to alleviate your burden and make the remainder of your debts manageable.

Instead of debt piling up, it will stabilize and you’ll have a new footing to reorganize your finances until you gain spending power once again.

What debts will go away when I declare bankruptcy?

As soon as you file for bankruptcy and the process is underway with a licensed trustee, you’ll see these debts vanish:

  • Your credit card balance
  • Credit lines (if uninsured)
  • Loans (if uninsured)
  • Income and municipal house taxes
  • Utility bills
  • Retail store accounts
  • Insurance premiums
  • Medical bills
  • Payday loans

What debts will remain when I declare personal bankruptcy?

Most unsecured debts will be wiped clean of your record, but the Canadian government does make some exceptions.

It’s important for you to evaluate the weight of the following in your debt since they won’t be waived when declaring bankruptcy:

  • Student and apprentice loans that are less than 7 years old
  • Child and spouse support
  • Fines and most court-mandated restitution
  • Court-mandated payments for sexual assault or bodily harm damages
  • Debts from fraud, embezzlement, or misappropriation
  • Specific government overpayments (check with a Licensed Insolvency Trustee)
  • Most secured debts with collateral, such as a house mortgage

Learn more about debts that stay or go away when declaring bankruptcy.

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