Which Debts Are Non-Dischargeable in Canada? Full Eligibility Breakdown by Category (2026)

Section 178(1) of the Bankruptcy and Insolvency Act lists 11 categories of debt that survive bankruptcy in Canada. Court fines, child support, spousal support, fraud debts, student loans under 7 years, and trust debts are all on the list. But “non-dischargeable” does not mean untouchable — most of these debts can be included in a consumer proposal if creditors accept. Here is every category, what it covers, and whether you have options.

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The 11 Categories of Non-Dischargeable Debt Under Section 178(1)

The BIA is specific. Each category targets a distinct type of obligation. Some protect victims. Some protect the government. Some protect the integrity of the insolvency system itself.

Not every category applies to most filers. About 23% of Canadian insolvency files contain at least one non-dischargeable debt. If you are reading this, you likely have one or two categories that matter. The rest are background.

The critical question for each category is not just “does it survive bankruptcy?” but “does it survive a consumer proposal?” That distinction shapes your entire insolvency strategy. Read each category with that question in mind.

Category 1–3: Fines, Penalties, and Restitution

Here is the full breakdown of all 11 categories in one table:

Category 1: Court fines, penalties, and restitution orders — Section 178(1)(a). This covers any fine or penalty imposed by a court, including criminal restitution orders, provincial offence fines, regulatory penalties, and victim surcharges. The debt survives both bankruptcy and consumer proposals. There is no insolvency mechanism to eliminate it.

Meghan in Oshawa has a $5,400 restitution order from a shoplifting conviction and $27,000 in credit card debt. She files bankruptcy. The credit cards are discharged. The $5,400 restitution order stays. She arranges an installment plan with the court — $225 per month for 24 months.

Category 2: Spousal and child support arrears — Section 178(1)(b). Past-due support obligations survive everything. The obligation was set by a court or separation agreement. The arrears accumulated because payments were missed. No insolvency proceeding erases them. Provincial enforcement agencies — FRO in Ontario, FMEP in BC, MEP in Alberta — continue collecting.

Category 3: Ongoing support obligations — Section 178(1)(c). Your ongoing duty to pay support is not a debt in the traditional sense. It is a continuing obligation. Filing bankruptcy or a consumer proposal does not change your monthly support payment. If you cannot afford the current amount, you must apply to family court for a variation order.

👉 Learn how child support works in bankruptcy

Category 4–5: Support Obligations and Fraud

Category 4: Fraud or misrepresentation to obtain credit — Section 178(1)(d). If you lied on a credit application — inflated your income, hid existing debts, or used a false identity — the resulting debt is non-dischargeable. The creditor must prove the misrepresentation was intentional and material. A mistake on an application is not fraud. The creditor carries the burden of proof.

Darren in Sudbury listed his income as $72,000 on a credit card application when he earned $41,000. The bank discovers the discrepancy during his bankruptcy. They file a Section 178(1)(d) claim. The court reviews the evidence. If the bank proves Darren intentionally inflated his income and the bank relied on that number, the $11,000 balance survives discharge. If Darren can show the bank had access to his actual income through other means, the claim fails.

This is one of the most contested categories. Creditors do not automatically win. They must go to court and prove their case. Many creditors do not bother for small amounts because the legal costs exceed the debt.

Category 5: Debts from fraud, embezzlement, or misappropriation — Section 178(1)(e). This is broader than Category 4. It covers any debt arising from fraud, embezzlement, misappropriation, or defalcation while acting in a fiduciary capacity. Business fraud, employee theft, misappropriation of client funds, and trust violations all fall here.

The key difference from Category 4: this is about what you did with money or property, not about how you obtained credit. A bookkeeper who diverts company funds commits embezzlement. A real estate agent who fails to deposit a trust payment commits misappropriation. These debts survive bankruptcy permanently.

In a consumer proposal, these debts can be settled if the creditor accepts the proposal terms. This makes proposals strategically valuable for large fraud judgments.

Category 6–8: Student Loans, Misrepresentation, and Dividends

Category 6: Student loans under 7 years — Section 178(1)(g). Loans under the Canada Student Loans Act, Canada Student Financial Assistance Act, or any provincial equivalent are non-dischargeable if you ceased being a student less than 7 years before filing. The clock runs from your official end-of-study date.

Priya in Brampton finished her degree in June 2021. She files bankruptcy in March 2026. That is 4 years and 9 months since end of studies. Her $26,000 in student loans survives. She must wait until June 2028 to file again and discharge them. In the meantime, RAP reduces her monthly payment based on income.

After 5 years, you can apply for a hardship discharge under Section 178(1.1). After 7 years, the loans become fully dischargeable through any insolvency proceeding. Timing your filing around this clock saves thousands.

Category 7: Debts from misrepresentation during insolvency — Section 178(1)(f). If you misrepresent your financial situation to your trustee during the insolvency process — hiding assets, underreporting income, failing to disclose a transfer of property — the debts connected to that misrepresentation survive. This category protects the integrity of the insolvency system.

Honest disclosure prevents this category from applying. Your LIT asks detailed questions about your assets, income, and transactions. Answer truthfully. The consequences of hiding information are far worse than the value of whatever you are trying to protect.

Category 8: Dividends owed by a bankrupt to creditors — Section 178(1)(h). If a bankrupt person owes money as a result of a previous bankruptcy — unpaid surplus income payments or unfulfilled conditions of a previous discharge — those amounts survive. This mainly applies to repeat filers who did not complete their obligations in a prior bankruptcy.

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Category 9–11: Trust Debts, Intent to Defraud, and Court-Ordered Damages

Category 9: Trust debts — Section 178(1)(a) (trust portion). Money you held in trust for another party and failed to remit is non-dischargeable. The most common examples are employer payroll remittances (CPP, EI, and income tax withheld from employees) and GST/HST collected from customers. CRA assesses these debts against the individual directors or responsible persons.

Harinder in Surrey operated a small restaurant. He collected $18,500 in GST/HST over 2 years and used it for operating expenses instead of remitting it to CRA. He closed the business and filed personal bankruptcy. The $18,500 GST/HST trust debt survives. CRA continues collecting, including prescribed interest at 10% annually. In a consumer proposal, CRA votes as a creditor and can accept settlement terms — they often recover more through a proposal than through enforcement.

Category 10: Debts arising from an intent to defraud — Section 178(1)(e) overlap. This extends beyond formal fraud to include debts where the bankrupt obtained property, services, or money through deliberate deception. The creditor must prove intent — negligence or carelessness is not enough. The standard is deliberate, knowing misrepresentation that caused the creditor to extend credit or provide services.

Category 11: Court-ordered damages for assault or similar misconduct — Section 178(1)(a.1). Damages awarded in a civil suit for intentional bodily harm, sexual assault, or wrongful death survive bankruptcy. These are relatively rare in insolvency files but absolute when they apply. The victim’s judgment remains enforceable regardless of the debtor’s bankruptcy.

Bankruptcy vs Consumer Proposal: Different Discharge Rules

The core strategic insight: bankruptcy discharge is automatic but limited. Consumer proposal discharge is negotiated but broader.

In bankruptcy, you receive an automatic discharge after 9 or 21 months. But Section 178(1) debts are carved out — they survive whether the creditor takes action or not. The exception is fraud debts, where the creditor must actively file a claim. But if they do file, the debt survives permanently.

In a consumer proposal, the rules change. A proposal is a contract. If a majority of creditors by dollar value accept, the proposal binds all unsecured creditors — including those holding non-dischargeable debts. Only court fines/restitution and support obligations are automatically excluded. Student loans, fraud debts, CRA trust debts, and misrepresentation debts can all be settled inside the proposal.

Elena in Windsor owes $16,000 in credit card debt obtained through income inflation on the application, $24,000 in regular credit card debt, and $8,000 in student loans (6 years post-study). In bankruptcy, the $16,000 fraud debt and $8,000 student loans survive — she exits owing $24,000 of the original $48,000. In a consumer proposal at 30 cents on the dollar ($14,400 over 48 months), all three debts are included. Total cost: $14,400 instead of $24,000. The proposal saves her $9,600.

How to Assess Your Own Debt Mix

Pull every statement, notice, and court order. Sort each debt into one of three buckets.

Bucket 1: Clearly dischargeable. Credit cards, personal loans, lines of credit, medical bills, cell phone contracts, payday loans, most CRA personal income tax debt. These are eliminated in both bankruptcy and consumer proposals.

Bucket 2: Non-dischargeable in bankruptcy, potentially included in a proposal. Fraud debts, student loans under 7 years, CRA trust debts, misrepresentation debts. A consumer proposal can settle these if creditors accept.

Bucket 3: Non-dischargeable in both proceedings. Court fines, restitution, child support arrears, spousal support arrears. These must be paid in full regardless of which path you choose.

Add up the totals for each bucket. If Bucket 2 is large — over $10,000 — a consumer proposal has a clear advantage over bankruptcy. If Bucket 2 is empty and Bucket 3 is your only concern, bankruptcy is faster and cheaper for the dischargeable portion.

When to Get a Professional Debt Map From a LIT

Do this assessment yourself first. Then bring your numbers to a Licensed Insolvency Trustee for confirmation. The LIT catches things you miss — a debt you thought was regular credit card debt might have a fraud claim attached. A student loan might be past the 7-year mark and fully dischargeable. A CRA balance might be personal tax (dischargeable) rather than trust debt (non-dischargeable).

The LIT consultation takes 45–60 minutes. It is free. You bring documentation. The LIT categorizes every debt, models your file under both bankruptcy and consumer proposal, and shows you the total cost and timeline for each option. No obligation to file.

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If your debts are mostly in Bucket 1, the choice is straightforward — either path works. If you have significant Bucket 2 or Bucket 3 debts, the strategy matters. Get the professional assessment before making a decision that affects the next 3–7 years of your financial life.

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