Industry Views & NewsBlogs

  There are two BIG misconceptions that I hear about debt and bankruptcy on a regular basis. One is the belief that if you do not pay your bills, you could be shipped off to jail. This belief stems from the historical existence of “debtor’s prison,” which was a reality in the 19^th century. Conviction usually occurred after a court-ordered monetary judgement was issued but remained unpaid. Debtors had two options – they could pay the judgement with the help of family or friends or be sent to a “workhouse,” where their labour would help pay back the amount owed. The emergence of bankruptcy law over the past century has eliminated the debtors’ prison throughout most of the world, in favour of a system that seeks to financially rehabilitate and grant a fresh start to debtors while considering the rights of creditors as well. Can you still go to jail for just being in debt? It is true that jail time is possible for certain debts not paid, but these are typically court-imposed fines and not debts incurred under normal circumstances. Such debts are generally not released under a bankruptcy filing (see Section 178 of the Bankruptcy and Insolvency Act) and are required to be paid regardless of your solvency situation. In my research on the topic, I was surprised to find a recent article on Huffington Post that described a class-action suit was taken against Benton County (Washington) in June of this year over its unconstitutional system for collecting court-imposed debts. The attorney stated, at the conclusion of the trial, that “(They were) very pleased that Benton County has stopped operating a modern-day debtors’ prison. No one should have to go to jail or perform manual labor simply because they are too poor to pay their fines,” The full article is available here. For a more local feel, if the history of debtor’s prisons in Canada intrigues you, you can find some interesting facts on Wikipedia here. Bankruptcy – the easy way out? The second misconception is that bankruptcy is the easy way out from paying your debts. In some cases, the process is, yes, arguably easy… for those who have nothing. For others, it is not quite as simple as walking away with all debts expunged. In bankruptcy, you have to pay back at least a portion of your debt with payments based on your income and creditors are still entitled to some of your assets. If you don’t abide by the rules of the system, you can either be in bankruptcy a very long time or can find yourself essentially kicked out of the process (left undischarged), opening up the door for your creditors to continue collecting from you. In summary, sometimes life happens. Paying your debts may become impossible. There are systems in place to help individuals who find themselves in that situation. Fair and democratic systems in which we, as Licensed Insolvency Trustees, are there to balance the needs and rights of creditors and debtors. No other professional has that mandate. It is why we are the go-to-professionals in the industry. If you need to see a trustee, visit CAIRP’s website to find a Chartered Insolvency and Restructuring Professional (CIRP), the recognizable symbol of integrity, education and professionalism of the insolvency and restructuring profession. You can also visit the Find a Trustee section of the Office of the Superintendent of Bankruptcy’s website. Mary Ann Marriott, CIRP, is a Licensed Insolvency Trustee with Allan Marshall & Associates Inc. and services their Halifax and Bridgewater locations in Nova Scotia. She is passionate about helping others succeed financially and regularly provides workshops, presentations and social media posts on this topic. You can find her on Twitter as @Dr_Debt_NS.