The Real Cost of Non-Dischargeable Debts in Canada: What You'll Still Owe After Insolvency (2026)

Non-dischargeable debts do not freeze when you file for bankruptcy. They keep growing. Child support arrears accrue interest at provincially prescribed rates. Student loans charge interest through your entire bankruptcy period. Court fines carry surcharges and enforcement fees. CRA trust debts compound at the prescribed rate. If you owe $25,000 in non-dischargeable debts when you file, you owe more than $25,000 when you are discharged. Here is what each category actually costs and how to plan for it.

👉 Get a free debt assessment — find a Licensed Insolvency Trustee

What Non-Dischargeable Debts Cost You After Insolvency

The real cost of non-dischargeable debts is not just the principal. It is principal plus interest plus enforcement costs plus the opportunity cost of money that could go to rebuilding your life.

Bankruptcy eliminates dischargeable debts and gives you a fresh start — but only on the debts it actually touches. The debts listed under Section 178(1) of the BIA survive your discharge. You walk out of bankruptcy owing them in full, often with 9–21 months of additional interest stacked on top.

The emotional weight is real. You go through the entire insolvency process expecting relief, and then you get a discharge letter that reminds you of the debts still hanging over you. Planning for these costs before you file makes the difference between a controlled payoff and a second financial crisis.

Child Support and Alimony Arrears: Ongoing Cost

Child support and spousal support arrears are the most expensive non-dischargeable debts for most filers. Section 178(1)(b) and (c) of the BIA protect these obligations absolutely. They survive bankruptcy. They survive consumer proposals. No insolvency proceeding reduces them by a single dollar.

In Ontario, the Family Responsibility Office (FRO) charges 2% annual interest on overdue child support. On $20,000 in arrears, that is $400 per year in interest. FRO also enforces through wage garnishment of up to 50% of net income, driver’s licence suspension, and passport denial. The enforcement costs stack — each garnishment order triggers administrative fees.

Denise in Barrie owes $23,500 in child support arrears and $38,000 in credit card debt. Before filing bankruptcy, her minimum credit card payments eat $760 per month. She pays $300 per month toward the support arrears — barely covering interest and fees. After filing bankruptcy, the credit cards are discharged. She redirects $700 per month to the arrears. At that rate, the $23,500 is paid off in 34 months instead of 10+ years.

Other provinces use similar enforcement. British Columbia’s Family Maintenance Enforcement Program charges interest on overdue support at rates set by regulation. Alberta’s Maintenance Enforcement Program can intercept federal payments, suspend licences, and register liens against property.

👉 Understand how child support works in bankruptcy

Student Loans Under 7 Years: Interest and Collection Costs

Student loans issued under federal or provincial student financial assistance legislation are non-dischargeable if you ceased being a student less than 7 years before filing. Section 178(1)(g) of the BIA sets this rule. The 7-year clock starts from the date you last ceased being a full-time or part-time student — not the date of your last loan disbursement.

During bankruptcy, interest continues accruing on the loan. The National Student Loans Service Centre (NSLSC) charges the floating rate (prime plus 0%) on the federal portion. Provincial loans carry their own rates. A $30,000 student loan at 5% accrues $1,500 per year in interest — $125 per month that adds to your balance while you are in bankruptcy.

Owen in Fredericton graduated 4 years ago with $34,000 in student loans and $22,000 in consumer debt. He files bankruptcy. The consumer debt is discharged. The student loans survive because he is only 4 years past end of studies. During his 9-month bankruptcy, the loans accrue $1,275 in interest. He exits bankruptcy owing $35,275 on the student loans alone.

The Repayment Assistance Plan (RAP) offers some relief. RAP Stage 1 reduces your monthly payment based on income — sometimes to $0. RAP Stage 2 (after 60 months of RAP) starts the government paying the interest. But RAP does not reduce the principal. It is a management tool, not a forgiveness program.

After 7 years from end of studies, you can file a new bankruptcy or consumer proposal and the student loans become dischargeable. After 5 years, you can apply to the court for hardship discharge under Section 178(1.1) — but you must prove you acted in good faith and will continue to experience financial hardship.

Court Fines, Restitution, and Fraud Judgments

Court-ordered fines and restitution survive both bankruptcy and consumer proposals. Section 178(1)(a) is absolute on this point. A $6,000 fine from a criminal conviction, a $3,200 restitution order, a $1,500 provincial offence penalty — all remain payable after discharge.

Most courts allow installment payment plans for fines. The terms vary by jurisdiction. Ontario courts typically allow monthly payments over 12–36 months. Federal fines from regulatory convictions may have different payment structures. Interest and surcharges vary — some jurisdictions add victim fine surcharges of 15–30% on top of the base fine.

Fraud judgments under Section 178(1)(e) survive bankruptcy permanently but can be included in a consumer proposal. The distinction matters for large fraud debts.

Liam in Saskatoon has a $9,800 restitution order from a fraud conviction and $41,000 in credit card debt. The restitution survives both bankruptcy and a proposal. The credit cards are dischargeable either way. His LIT recommends bankruptcy for cost efficiency — $1,800 over 9 months versus a $16,400 proposal over 48 months. The $9,800 restitution goes on a 24-month court payment plan at $408 per month after discharge.

CRA Trust Debts: Source Deductions and GST/HST

CRA trust debts are a separate category from personal income tax debt. Personal income tax debt — what most individuals owe CRA — is fully dischargeable in both bankruptcy and consumer proposals. Trust debts are not.

Trust debts arise when you collect money on behalf of the government and fail to remit it. Employer payroll source deductions (CPP, EI, income tax withheld from employees) are trust debts. GST/HST collected from customers and not remitted is a trust debt. These survive bankruptcy under Section 178(1)(a).

CRA charges prescribed interest on trust debts — currently 10% on outstanding balances. On a $15,000 trust debt, that is $1,500 per year. CRA also adds penalties of 10% on the first late remittance and 20% on subsequent ones if assessed within a three-year period. The combined cost escalates fast.

👉 Explore CRA debt relief options

How Eliminating Dischargeable Debts Frees Cash for Non-Dischargeable Ones

The biggest financial benefit of filing insolvency when you have mixed debts is the cash flow redirect. Every dollar you stop paying on dischargeable debts becomes a dollar you can direct to non-dischargeable obligations.

This table shows real numbers. By filing a consumer proposal on $50,000 in dischargeable debt at 30 cents on the dollar ($300/month over 50 months), you free up $580 per month for non-dischargeable obligations. The arrears are paid off 7+ years faster.

Kayla in Red Deer owes $42,000 in dischargeable debt and $17,500 in child support arrears. She earns $3,600 net per month. Before filing, she pays $840 in minimum payments on credit cards and loans, $350 to the arrears, and has $2,410 left for living expenses. After filing a consumer proposal at $380 per month, she pays $380 on the proposal and $810 to the arrears. The arrears are cleared in 22 months. Without filing, the arrears would take over 6 years at $350 per month.

Total Post-Filing Budget Model: Before and After Insolvency

Here is a full budget model for a mixed-debt file.

Situation: $40,000 dischargeable debt (credit cards, personal loan) and $25,000 non-dischargeable debt ($16,000 child support arrears, $9,000 student loans at 3 years post-study).

Without insolvency: Monthly minimums on dischargeable debt: $800. Monthly payment on arrears: $400. Monthly student loan payment: $250. Total debt payments: $1,450/month. Total cost over full repayment: $73,000+ including interest over 8–12 years.

With consumer proposal: Proposal at 30 cents on the dollar on $40,000 = $12,000 over 48 months = $250/month. Freed cash flow: $550/month redirected to non-dischargeable debts. Arrears paid off in 29 months at $550/month. Student loans managed through RAP until the 7-year mark, then discharged in a second filing if needed. Total cost: $12,000 proposal + $16,000 arrears + $9,000 student loans (or discharged later) = $37,000–$41,000.

Savings: $32,000–$36,000 compared to repaying everything without filing.

👉 Model your own numbers — use the consumer proposal calculator

Working With a LIT to Minimize Total Cost

A Licensed Insolvency Trustee runs the complete cost model for your specific file. The initial consultation is free and takes 45–60 minutes. Bring every statement, court order, CRA notice, and student loan document.

The LIT calculates your total debt, categorizes each obligation as dischargeable or non-dischargeable, and models your file under both bankruptcy and consumer proposal scenarios. You see the total cost, monthly payment, and timeline for each option. The LIT also identifies post-filing strategies — RAP enrollment for student loans, payment plan negotiations for fines, and Taxpayer Relief applications for CRA penalties.

The goal is the lowest total cost across all debts, not just the insolvency portion. A cheaper bankruptcy is not always the best choice if it leaves you with $25,000 in non-dischargeable debts and no plan to pay them. A slightly more expensive consumer proposal that includes $15,000 in otherwise non-dischargeable debts can save thousands over the full repayment timeline.

Start by identifying your debts. Separate them into dischargeable and non-dischargeable categories using the full category breakdown. Then book a free consultation with a LIT to get exact numbers for your file.

👉 Start with a free consultation — find a LIT near you

This article is educational only and does not constitute legal or financial advice. Consult a Licensed Insolvency Trustee for advice specific to your situation.