The Bankruptcy Process in 12 Steps
Step 1 - Recognize the Problem
This is often the most difficult step as it requires that you admit that you our having financial troubles that are beyond your control and you 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 & shame and there is often a stigma of failure related to bankruptcy.
The truth is that anyone of us 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)
A free, confidential consultation will be provided where the Trustee will complete a thorough review of your financial situation and discuss your options, which may include: budgeting assistance or a referral to a non-profit credit counseling agency if you are in the early stages of financial difficulty; a referral back to your financial institution to inquire about a consolidation loan (these options may help you get back on track and keep your credit rating in good standing; or, if your debts are too high and/or in collections, then the Trustee may recommend a 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 - Complete the Application Process
If you choose to move forward with a bankruptcy or consumer proposal, the Trustee will gather all relevant information and documentation. The Trustee will discuss the requirements/duties that you will have as a bankrupt person.
Step 4 - File for Bankruptcy
The documents are filed with the Office of Superintendent of Bankruptcyand notices sent to your creditors. Once bankrupt, there is automatically a stay of proceedingsin place which stops all legal actions, wage garnishments and other collection activities.
Step 5 - Debt Payments
At this point 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 decide to give up these assets, you can stop making these payments and the creditor can take back their security and file an unsecured claim against 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, against your bankruptcy estate. Your Trustee will review these claims and decided which ones to admit or disallow. Your Trustee will discuss any disallowed claims with you. Unsecured creditors with legitimate claims are allowed to share in any proceeds that get paid out from your bankruptcy estate. Secured creditors with legitimate claims will likely give you the option of continuing with payments or giving back the asset securing their claim.
Step 7 - Sale of Assets
The Trustee will sell any non-exempt assets for the benefit of your unsecured creditors. This information will have been determined during the application process at which time the Trustee will have provided you with the option of giving up the non-exempt assets or keeping the assets by repaying the value of those assets into your bankruptcy estate.
Step 8 - Trustee’s Fees
If the value of the assets sold are not sufficient to pay the Trustee’s fees you will be required to make monthly payments to cover those costs. This information will be disclosed during the initial application process so there should be no surprises.
Step 9 - Credit Counselling
You will be required to attend 2 counselling sessions to discuss the causes of bankruptcy and to review money management and budgeting skills. The sessions are intended to help you better understand the warning signs of bankruptcy, 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/expense statements during your bankruptcy. Your Trustee will use these reports to determine any surplus incomeobligations.
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 final Court discharge.
Step 12 - Discharge
You will automatically receive a discharge as long as you have complied with all of the terms of your bankruptcy. Otherwise, you may be required to attend a Court hearing where conditions may be imposed before you can receive a discharge order.
This article is meant to provide you with a general understanding of the bankruptcy process however each individual situation is unique. Your Trustee will review the details of 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 (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth - it's your choice.