Personal Bankruptcy in 12 Steps

Step 1 – Recognize the Problem 

Often the most challenging step as it requires recognition that you are having financial troubles beyond your control and need help. The warning signs are all around us and eventually become too strong to ignore. Most people delay seeking professional assistance out of embarrassment, guilt or shame, and there is often a stigma of failure related to bankruptcy.

The truth is that anyone can run into financial difficulties for various reasons such as a job loss, an illness, a marriage breakdown, or a whole host of life events beyond our control.

Step 2 – Contact a Licensed Insolvency Trustee (LIT) for a FREE Consultation

The Trustee will provide a free confidential consultation and review your financial situation and discuss your options, including budgeting assistance or a referral to a non-profit credit counselling agency if you are in the early stages of financial difficulty. It might even be to get a consolidation loan from a financial institution. These options may help you get back on track and keep your credit rating in good standing.

However, if your debts are too high or in collections, the Trustee may recommend personal bankruptcy or consumer proposal to help deal with your debts. Your Trustee will explain the pros and cons of each option, so you can make the decision that best meets your needs.

Step 3 – FREE Application Process

If you choose to move forward with personal bankruptcy or consumer proposal, the Trustee will gather all relevant information and documentation. The Trustee will discuss the tasks or duties that you must do to complete your bankruptcy or consumer proposal successfully.

Step 4 – File for Bankruptcy

Meet with the Trustee to review and sign your bankruptcy documents. Once the bankruptcy documents are signed, they will be filed with the Office of Superintendent of Bankruptcy, and notices will be sent to your creditors.

Once the Office of Superintendent of Bankruptcy processes the bankruptcy documents, a stay of proceedings stops all legal actions, wage garnishments and other collection activities by your creditors. This will stop the collection calls.

Step 5 – Debt Payments 

Your Trustee will have advised you to stop paying your unsecured creditors and continue paying your secured creditors, such as your mortgage and vehicle loan. This assumes that you have decided to keep the assets, such as your house and vehicle. If you choose to give up these assets, you can stop making these payments, and the creditor can take back their security and file an unsecured claim in your bankruptcy estate for any balance owing once the security is sold.

Step 6 – Claims of Creditors

Your creditors will file claims, secured or unsecured, in your bankruptcy estate. Your Trustee will review these claims and decided which ones are admitted or disallowed. Your Trustee will discuss any disallowed claims with you.

Unsecured creditors with admitted claims will share in any proceeds that get paid out from your bankruptcy estate.

Secured creditors with legitimate claims will likely give you the option to continuing with payments or giving back the asset secured by their debt.

Step 7 – Sale of Assets

The Trustee will sell any non-exempt assets for the benefit of your unsecured creditors. The status of the exempt and non-exempt asset will be reviewed with you by the Trustee in the application process in Step 3. The Trustee will give you the option of giving up the non-exempt assets or keeping the non-exempt assets. You must pay your bankruptcy estate for the value of any non-exempt asset that you keep.

Step 8 – Trustee’s Fees

If the value of the non-exempt assets sold is not sufficient to pay the Trustee’s fees, you will be required to make monthly payments to cover these costs. The Trustee will review this in the application process, in Step 3, so there should be no surprises.

Step 9 – Mandatory Financial Counselling

You will be required to attend two counselling sessions to develop budgeting skills, review money management and set future financial goals. The purpose of these sessions is to help you better understand the warning signs of financial difficulty, avoid future financial missteps and learn how to rebuild and manage credit after bankruptcy.

Step 10 – Monthly Reporting 

You will be required to submit monthly income and expense statements during your bankruptcy. Your Trustee will use these reports to determine any surplus income obligations.

Step 11 – Trustees Report

Your Trustee will prepare a final report to the Office of Superintendent of Bankruptcy and your creditors before you receive your discharge.

Step 12 – Discharge

You will receive a discharge if you have completed all of your bankruptcy duties.

If you have not completed some of your duties, you will be required to attend a Court hearing, where the Court will set the duties that you must complete before you can be discharged from bankruptcy.

This article is a general overview of the bankruptcy process; however, each situation is unique. Your Trustee will review your particular situation and provide you with information specific to your circumstances so you can make an informed decision.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.