Often people ask us at a first meeting or consult if they need to include all their debts in bankruptcy in Canada and if they must list all the people they owe money to, including family and friends. They often ask if they can keep a credit card.
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What Debts to Include
The answer is a simple one. You must include all debts in a proposal or a bankruptcy. Both personal bankruptcy and a consumer proposal are formal proceedings that allow you to get a fresh start from all unsecured debt.
The debts that can be discharged in a bankruptcy or proposal are quite broad. Anyone you owe money to must be listed on your statement of affairs at the time of your filing. This includes all unsecured debts like your car loan, bank loan, all credit cards, outstanding utility bills and yes, money you owe to friends and family.
Even your mortgage must be listed, although a mortgage is not included as part of the bankruptcy because your mortgage lender is a secured creditor and secured creditors are not included in a bankruptcy.
You Want A Fresh Start From All Your Debts
Since you want a fresh start by filing bankruptcy, this actually makes a lot of sense. There is little point “cherry picking” and being potentially stuck with a debt after you have completed the bankruptcy or proposal.
If you need to eliminate credit card debt, then you want to eliminate all of them. We will show you options, like getting a secured credit card, to help you pay bills you once used your credit card for.
Including debts to friends and/or family is difficult, however, it could be more difficult down the road if you have excluded them and there is a falling out between the parties. You do not want to be responsible for the debt after you have completed your bankruptcy or proposal because you deliberately excluded someone.
Be Honest About Your Debts
It is important that you be honest when listing your creditors on your bankruptcy statement of affairs. Leaving a creditor off intentionally, if it is discovered, can jeopardize your bankruptcy discharge. Without this discharge, you will not be relieved of all of your other debts. Honest mistakes do happen, you may forget a creditor and so accidentally leave them off your creditors list. These types of omissions or errors can be repaired and addressed, but trying to hide a debt intentionally would actually put you in a worse situation.
Surrendering Credit Cards In a Bankruptcy
Can I keep a credit card if I file bankruptcy is one of the most common questions I receive. I understand, you may have accumulated a lot of reward points on the card, you may even have no outstanding balance on the card at the time of the bankruptcy or proposal. Unfortunately this doesn’t matter. Credit cards, the actual card itself, is the property of the credit card company that issued it to you and it needs to be returned to that credit card company when you file for bankruptcy or a proposal. Bankruptcy law also states that you must hand over any credit cards to your licensed insolvency trustee at the time your file. So unfortunately, even with points and no balance, all credit cards must be surrendered in a personal bankruptcy.
The number one reason for filing bankruptcy is to eliminate overwhelming debt.
If you are struggling with debts, contact us for a free consultation. Bankruptcy may be the answer, but we’ll also review other options with you with the end goal to eliminate your debts and give you a fresh financial start.