Not all debtors make a fresh start after bankruptcy
Bankruptcy law allows for the financial rehabilitation of bankrupt people by relieving them of the burden of past debts on the fair distribution of their assets among their creditors. One of the main objectives of the Bankruptcy and Insolvency Law, RSC (1985), c. B-3 (the “BIA“) is to give honest but unhappy debtors a fresh start in circumstances where it is prudent to write off the debt or liability resulting from oversight, negligence or incompetence.
When a bankruptcy assignment is made, a bankrupt gives up his assets in exchange for the discharge of his unsecured debt from sources such as credit cards, unsecured lines of credit and overdue bills. Secured debts, those that are secured by some form of property or collateral, such as a mortgage on land or the financing of a motor vehicle, will not be discharged in the event of bankruptcy. There are also several debts listed in the BIA that will not be discharged in bankruptcy because they arise out of or contain an element of wrongdoing or activity that may be considered wrongdoing.
Section 178 of the BIA make a list of debts that survive a discharge from bankruptcy. These types of liabilities will not release a bankrupt from his obligation to repay such debt even after being discharged from bankruptcy. The basis is that the debts that come within the scope of the provision are based on an overriding social policy where the repayment of the debt far outweighs any possible benefit to the bankrupt of being released from past responsibility. . The courts have concluded that section 178 of the BIA is a comprehensive code in that it defines the debts that will survive a discharge from bankruptcy.
A bankruptcy discharge order will not release a bankrupt from debts arising from a fine, penalty, restitution order or similar debts imposed by a court, support debts, pensions. spousal and child support, certain student loan debts and debts arising from fraud, embezzlement, embezzlement, embezzlement or fraud. Typically, these types of debts will survive the discharge of a bankrupt.
Paragraphs 178 (d) and (e) of the BIA are based on what can be called moral concepts which deny that bankruptcy harbors dishonest conduct or activity perpetrated by the bankrupt prior to making an assignment. The idea behind these provisions is that a bankrupt should not be rewarded for conduct that amounts to wrongdoing, dishonesty or misconduct. Allowing a bankrupt to pay off his debt resulting from this type of conduct would reward such wrongdoing and allow bankrupts to shirk their liability.
When a bankrupt is released from bankruptcy, he is released from his obligation to repay previous debts that existed on the day the bankruptcy was declared. Generally, a bankrupt will be discharged from bankruptcy nine months after filing for bankruptcy if, it is his first bankruptcy, he has attended two financial counseling sessions, the bankrupt is not required to pay part of his income in the bankrupt’s assets and the discharge is not contested by a creditor, a Licensed Insolvency Trustee or the Office of the Superintendent of Bankruptcy.
Bankruptcy law can be complicated and decisions should be made on the advice of a bankruptcy lawyer who will act only in the best interests of the bankrupt.