When investigating the different types of debt solutions available in Canada, two that offer federally licensed and regulated protection are bankruptcy and consumer proposals. While it’s generally understood that common debts such as credit cards, lines of credit or loans can be resolved using a trustee or proposal administrator, many people have questions about what other debts can and can’t be included:
Student Loans: If it’s been more than seven years since you were last a student, student loans can be included under a bankruptcy or consumer proposal. If only five years have passed since your last study date you can alternatively make an application for your student loans to be released under hardship provision following your bankruptcy.
Income Tax Debts: Whether it’s for personal income taxes, GST or business taxes due, debts with Canada Revenue Agency can be included in a bankruptcy or consumer proposal and bank account seizures or wage garnishments stemming from the debts will be immediately halted. In fact, a consumer proposal is the only method that can be used to negotiate a reduced balance owing for tax debts.
Co-signed Debts: If there are debts that have been co-signed or that are held jointly with someone else, the person filing the bankruptcy or consumer proposal will be discharged from having to repay the debts. The guarantor or co-signor however, will be obligated to repay the full balance owing. Having a co-signor gives the creditor additional means to recover their debt in full, whether it’s the original party paying, or their guarantor.
Secured Debts: Debts that use assets such as a property or vehicle as collateral can be included under a consumer proposal or bankruptcy should you wish to end the ongoing commitment, as well as the shortfall/deficit once the asset has been returned. If the account is in good standing and the creditor with whom you have the debt is in agreement, you could choose to continue with the arrangements in place instead
Since debts and financial obligations can be unclear, it’s always best to speak with a licensed trustee before self-assessing your situation. Situations and circumstances can vary greatly so when in doubt as to how to approach certain debts, a professional can make the navigation much more clear.