What Debts Are Not Discharged in a Consumer Proposal or Bankruptcy in Alberta, Canada?

When our clients reach out to us about their financial situation, one of the first questions we often hear is: “Can I include all my debts?”

It’s an important question, and the honest answer is: not always. While a consumer proposal or bankruptcy can provide meaningful relief from many types of debt, certain obligations are excluded under Canada’s Bankruptcy and Insolvency Act. In some cases, these debts may still need to be disclosed, but they may not be eliminated or released through the insolvency process. Understanding which debts qualify before you file helps you set realistic expectations and choose the right path forward.

Which Types of Debts Can Be Addressed?

Before covering what isn’t included, it helps to understand what is. Both consumer proposals and bankruptcy are designed to address unsecured debt, which is debt that is not tied to an asset. Common examples include:

• Credit card balances

• Personal loans

• Payday loans

• Unsecured lines of credit

• Income tax debt owed to the Canada Revenue Agency (CRA), in most cases

These debts can often be addressed through a consumer proposal or bankruptcy, depending on your situation and the solution chosen.

To understand how these solutions work in practice, read our article: How Does a Consumer Proposal Work?

Debts That Are Not Discharged or Eliminated in a Consumer Proposal or Bankruptcy

The following debt types are specifically excluded under Canadian insolvency law. Even after filing, these obligations remain your responsibility.

Student Loans

Government student loans are one of the most commonly misunderstood debt types. Under Canadian insolvency law, they are generally not discharged through bankruptcy or a consumer proposal if you have been out of school for less than seven years.

If more than seven years have passed since you stopped being a full-time or part-time student, government student loans may be eligible to be discharged through bankruptcy or a consumer proposal.

If at least five years have passed, but not seven, a court application may be possible under the hardship provision. Approval is not automatic, and a Licensed Insolvency Trustee can help explain what may apply.

Private student loans may be treated differently depending on how they are structured. A Licensed Insolvency Trustee can review your specific situation to clarify what applies.

Secured Debts

Secured debts are tied to an asset, such as your home or vehicle. A consumer proposal or bankruptcy does not automatically remove the lender’s security interest in that asset.

In many cases, you may be able to keep a secured asset if payments remain current. If payments stop, the lender may have the right to repossess or foreclose. If the asset is surrendered and a shortfall remains, the remaining balance may be treated differently and should be reviewed with a Licensed Insolvency Trustee.

For more information on protecting your assets, read: Can You Keep Your House & Car in a Consumer Proposal in Alberta?

Child Support and Spousal Support Arrears

Outstanding child or spousal support payments are not dischargeable in bankruptcy and cannot be included in a consumer proposal. These obligations are protected under family law and are treated separately from general unsecured debt.

If you are behind on support payments, you will still be required to address those arrears regardless of any insolvency filing.

Debts Arising From Fraud or Misrepresentation

Debts arising from fraud, misrepresentation, or certain court judgments related to fraud may not be released through bankruptcy or a consumer proposal. These debts may remain payable after the insolvency process.

Court-Ordered Fines, Penalties, and Restitution

Court-imposed fines, penalties, and restitution orders are generally not discharged through bankruptcy or a consumer proposal and may remain payable after filing. If you have outstanding court-ordered financial obligations, these will remain in place after any insolvency filing.

Debts From Intentional Harm

If a court has awarded damages because of intentional bodily harm, sexual assault, wrongful death, or deliberate property damage, those debts may not be discharged. The law does not permit insolvency to shield individuals from the financial consequences of deliberate harmful acts.

What About CRA Tax Debt?

Many Albertans are surprised to learn that CRA income tax debt can often be included in both consumer proposals and bankruptcy. This is a significant benefit for individuals managing tax arrears alongside other unsecured debt.

However, certain CRA debts, such as those tied to fraud or specific penalty types, may be treated differently. It is important to review your full tax situation with a Licensed Insolvency Trustee before making assumptions.

To understand what happens when the CRA takes collection action, read: What Happens If CRA Freezes Your Bank Account?

Why This Matters Before You File

Understanding which debts are excluded helps you build a realistic plan. If a significant portion of your debt may not be discharged, such as certain student loans or support arrears, a consumer proposal or bankruptcy may not fully resolve your financial situation on its own.

This does not mean these solutions are not right for you. In many cases, eliminating your eligible unsecured debt frees up the cash flow needed to manage remaining obligations more effectively.

A Licensed Insolvency Trustee will review your complete debt picture, including both eligible and excluded balances, before recommending a path forward. Depending on your circumstances, this may include debt counselling, a consumer proposal, or bankruptcy.

You Deserve Clear Answers Before You Decide

Debt relief decisions work best when they are based on accurate, complete information. Knowing which debts may be addressed and which may remain payable gives you the clarity to choose the right option for your situation. Financial difficulty can affect anyone. It does not reflect your ability to recover. What matters is taking the right step forward with the right support.

Take the First Step Toward Financial Clarity

At SCB Debt Solutions, we help Albertans understand every aspect of their debt relief options, including exactly which debts qualify and what to expect from each path.

Book a free, confidential consultation with a Licensed Insolvency Trustee. There is no obligation - just honest answers and practical next steps to help you move forward with confidence.

FAQs

Q1) If my student loans are less than seven years old, do I have any options at all?

Yes, there may be options. If at least five years have passed since you stopped being a student, you may be able to apply to the court under the hardship provision. Approval is not automatic, and the court will consider your circumstances. A Licensed Insolvency Trustee can explain whether this may apply.

Q2) Are gambling debts treated differently?

Gambling-related credit card, line of credit, or payday loan debt may still be treated as unsecured debt. However, in bankruptcy, gambling activity may be reviewed and could affect the discharge process or lead to additional conditions.

Q3) What happens to debts I ran up shortly before filing?

Your trustee will review your recent financial activity as part of the process. Large cash advances, balance transfers, or credit purchases made in the months leading up to a filing can be examined more closely, and in some cases a creditor can ask the court to exclude them if they believe the debt was taken on or incurred without a reasonable intention or ability to repay.

Q4) Can GST or HST debt from self-employment be included?

GST/HST debt from self-employment may be treated as unsecured debt in many consumer proposals or bankruptcies, but tax debts can be complex. A Licensed Insolvency Trustee should review the type of tax debt, filing history, business structure, and CRA collection status before confirming how it may be handled.