TWO TYPES OF DEBT
If you get or have a consolidated loan it is very likely that the creditor has taken security and placed a lien on your asset(s). If you have made all your payments and go bankrupt a creditor cannot repossess the asset.
If a person wants to keep an asset, it is important to keep a good relationship with that creditor. If you owe significantly more than the asset is worth, you should consider surrendering the asset, with the result that you have no further obligation to pay.
CO-SIGNERS / GUARANTORS
In some cases, creditors may have taken a guarantee or had someone co-sign on your behalf. If you go bankrupt the creditor will focus their collection action on your co-signer and they will have to pay that debt. In many cases, co-signers and guarantors are family members or persons related to the borrower.
If a person goes bankrupt and you receive a discharge from bankruptcy, you are, as a discharged bankrupt, at liberty to pay back your relatives or any other party you choose. As a discharged bankrupt, you have no legal obligation to pay or reimburse any creditor, however, repayments to a relative after you have received a discharge are gratuitous payments made by you which you are under no legal obligation to make.
Government debts in many cases are treated exactly the same as unsecured debts in a bankruptcy and include Income Taxes, GST and directors’ liabilities for unpaid company debts.
HRDC debts, WCB, or Employment Insurance benefits received while ineligible are however, treated very differently. The obligation for monies you received and consumed while you were ineligible will survive a bankruptcy and must be repaid, in most cases after you receive your discharge from bankruptcy.