Bankruptcy: Getting Back On Your Feet
Filing for bankruptcy can be a difficult decision, but it may be the best option for your financial situation if you are struggling with unmanageable debt. When you file for bankruptcy, the vast majority of your unsecured debts will be discharged, and you will have a fresh start. Bankruptcy can help you get back on your feet and rebuild your credit.
Advantages of bankruptcy include:
- Discharge of most unsecured debts
- Stops wage garnishments and legal action by creditors
- Prevents repossession of assets
- Can help rebuild your life
- You do not automatically lose your assets.
If you are looking to declare bankruptcy, contact us today to schedule a free consultation. One of our Licensed Insolvency Trustees can help you determine if bankruptcy is the right option for you.
Discuss Your Situation With A Licensed Insolvency Trustee Today
Bankruptcy is a legal process in which an individual or business can seek relief from unsecured debt they cannot pay. Personal bankruptcy, in essence, is a way of indicating to your creditors that you are in financial distress and have no other means of paying them back. It is an alternative to a consumer proposal and is typically used as a last resort option.
Once filed, you will receive the utmost protection from the Bankruptcy and Insolvency Act; the law which governs personal bankruptcy filings. Your creditors will no longer be allowed to pursue collection activities or legal proceedings against you, such as a wage garnishment.
How do payments work in Bankruptcy?
In a bankruptcy, you will typically make monthly payments to your Licensed Insolvency Trustee for a period of either 9 or 21 months if it is your first bankruptcy, and 24 or 36 months if it is your second bankruptcy.
Your payment will be based primarily on two components. The first is the amount of money you make in a month, relative to your household size. These are called surplus income payments and are based upon a formula set out by the federal government. The second component is based upon any non-exempt assets that you wish to keep.
You will be required to submit monthly income and expense forms which will be used to track how much money you earn throughout your bankruptcy. As your income increases and/or decreases, your payments may increase or decrease based upon the surplus income calculation.
What Debt Can Be Included In Bankruptcy?
Nearly all amounts owing to unsecured creditors can be included in personal bankruptcy. This includes, but is not limited to:
- Credit Card Debt & Payday Loans
- Lines Of Credit & Personal Loan Debt
- Student Loan Debt
- Certain debts owing to the Canada Revenue Agency
Debts that cannot be included include, but are not limited to:
- Fines & Penalties imposed by a court,
- Child Support Arrears,
- Property Taxes, and
- Secured Debts, in most cases.
Visit our blog article on what debts cannot be included in an insolvency proceeding.
Debt Advice. Tailored For You.
The Bankruptcy Process
Meet with a Licensed Insolvency Trustee
The first step is to meet with one of our debt experts who will review your financial situation and explain all of your options, including personal bankruptcy as well as personal bankruptcy alternatives. During this meeting, you will be provided with an estimate of what bankruptcy could look like in your situation based upon an estimate of your surplus income payments & realizable assets.
If you are both in agreement that personal bankruptcy is the best solution for your debt problems, you will be asked to provide documentation that will be used to prepare your bankruptcy paperwork.
Filing your bankruptcy and beginning your payments
Once your bankruptcy is filed you immediately receive protection from your creditors & collection agencies. This includes stopping collection calls & any legal action that is being taken against you from them. Unlike a consumer proposal where creditors accept or reject your offer to them, filing bankruptcy cannot be rejected by your creditors.
Your payments will typically begin the month you file bankruptcy. These will be paid to your bankruptcy trustee who will distribute the funds to your creditors, as required.
During your bankruptcy, you will be required to perform several tasks:
- You must attend two financial counseling sessions,
- Submitting your income & expense forms every month, and
- Make your monthly payments.
Obtaining your discharge
Obtaining your discharge is the most important step after you declare bankruptcy. This occurs at the end of your bankruptcy term which ranges between 9-36 months depending if you have filed bankruptcy in the past. Click here for more info on how many times you can declare bankruptcy.
Your goal is to obtain an absolute discharge, which may automatically be granted depending on your circumstances. This means that you are officially released from any legal obligation to repay most debts that existed the day you filed your bankuptcy.
In the event you do not complete your bankruptcy duties your trustee may be required to oppose your discharge which may involve attending court and most likely an extension of your bankruptcy until you fulfill the terms required.
How Powell Associates Ltd. Helps
Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress.
Our bankruptcy services ensure you are treated fairly and with dignity.
- 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 personal bankruptcy, we deal directly with your creditors on your behalf. Your creditors are required to stop contacting you or continuing legal actions against you. Contact us for a free consultation.
Frequently Asked Questions
If you have been out of school for more than 7 years since then yes, your student loans will be discharged in bankruptcy.
Bankruptcy will stay on your credit bureau for a period of 6 years past the date of your discharge if you are a first-time bankrupt or 14 years past the date of discharge for a second-time bankrupt.
Your credit report will be noted for:
|Bankruptcy Duration||Length of time on Credit Report|
|9 Months (first-timer)||6 Years + 9 Months = Nearly 7 Years.|
|21 Months (first-timer)||6 Years + 21 Months = Nearly 8 Years|
|24 Months (2nd timer)||14 Years + 24 Months = 16 Years|
|36 Months (2nd timer)||14 Years + 36 Months = 17 Years|
Choosing the most appropriate option does require more than looking just at the dollars and cents. You must consider each bankruptcy alternative and make an informed decision.
The BIA is the law that governs the different types of bankruptcies and consumer proposals in Canada. It is the foundation of our bankruptcy service and is our rule-book when helping consumers.
It does not regulate other options such as a debt consolidation loan offered through a bank or credit union, debt settlement, or credit counselling.
If you wish to surrender the asset that is tied to the secured debt back to your creditor, then yes. However, if you want to retain the asset then you are required to continue making payments on the debt.
Another common question we get is 'Will I lose my house if I go bankrupt'.
The BIA, along with provincial legislation governs the various bankruptcy exemptions that prohibit Licensed Insolvency Trustees from seizing specific types of Debtor's assets.
Examples include vehicles, household and personal effects, RRSP’s, pension plans, and life insurance cash surrender value.
Each province determines what the exemptions are and how they are calculated.
Generally speaking, no. However, as with everything involving complex financial restructurings there are many considerations. We wrote an in-depth article here on filing bankruptcy when married or common-law.