Filing For Bankruptcy – Is Declaring Bankruptcy Right For Me?
If you are unable to repay your debts you can file for bankruptcy – a legal process that allows honest but unfortunate debtors to receive relief from their debts in a process that is intended to be fair for the debtor and their creditors. Filing For Bankruptcy is a serious decision so you must speak with a Trustee to learn if bankruptcy is right for you.
Recognizing a Debt Problem
In order to take advantage of the bankruptcy laws in Canada you first need to realize you are having financial difficulties that you don’t believe you can work out without professional assistance.
While every situation is unique the following money problems might mean you need to file for bankruptcy as a way out of debt:
- Your credit cards are over the limit;
- You are having trouble making minimum payments on your debts;
- You are using cash advances for basic necessities and bills;
- Legal action has been started against you;
- Your debts have been sold to a collection agency;
- Your wages are being garnished.
Money problems can be stressful, but speaking with a Licensed Insolvency Trustee (LIT) can help put your mind at rest. A LIT can show you how filing for bankruptcy can put you on the path to living debt free.
Finding a Licensed Insolvency Trustee
If you are thinking about filing for bankruptcy as a way to get out of debt the first step you should take is contacting a Licensed Insolvency Trustee (LIT) to learn more about filing bankruptcy, how it will impact you, and if there are any alternatives that could fit your financial situation.
A LIT is a person who has been licensed by the Office of the Superintendent of Bankruptcy to administer to the bankruptcy process.
Only a Trustee can assist a person with filing bankruptcy; no other debt relief professional is licensed to help with filing bankruptcy, and you cannot file bankruptcy on your own in Canada. In order to declare bankruptcy in Canada you must work with a local Insolvency Trustee.
By scheduling a confidential, risk free evaluation with an Insolvency Trustee, the trustee will help you evaluate your money problems and discuss any alternatives that might help you solve your financial troubles. The trustee will provide you information on the bankruptcy process, your alternatives, and how bankruptcy will impact your personal situation.
When choosing a trustee to work with make sure that:
- You feel comfortable with the trustee;
- The trustee is local;
- The trustee patiently answers all of your questions and concerns.
If you do not feel comfortable with the trustee during the consultation you are under no obligation to use their services and you can seek another trustee for a free evaluation.
Meeting With the LIT
Once you have selected a trustee in your area you can contact them for a free consultation to review your financial situation.
The trustee will help you choose the best solution for you based on your unique financial challenges.
What Happens if I File For Bankruptcy?
If you and the trustee decide that filing for bankruptcy is the right option for you the trustee will help you complete the required paperwork. Once the necessary bankruptcy forms have been complete your LIT will file the paperwork with the OSB, which officially declares you as bankrupt. Once you have gone bankrupt an “automatic stay” goes into place, which is the legal order that prevents your creditors from collecting from you or contacting you in any matter.
In fact, your LIT will handle all communications with your creditors from this point forward.
Once you’ve declared bankruptcy:
- You will stop making payments on your debts that were included in your bankruptcy paperwork (you will still have to make payments on your secured debts if you elected to keep these assets);
- Wage garnishments against you will stop;
- Lawsuits filed against you by your creditors will stop;
- You will turn over your assets that are not protected by the bankruptcy exemptions to your Trustee, who will sell these assets and hold the funds in trust for distribution to your creditors.
Notifying Your Creditors
Once you have declared bankruptcy, your LIT will be responsible for notifying your creditors of this fact.
Holding a Meeting of Creditors
In some cases when you file for bankruptcy your creditors will request a meeting of creditors.
The purpose of this meeting is to give the creditors information about your bankruptcy and the creditors can give directions to the Insolvency Trustee.
The debtor (you) is required to attend this meeting.
What Happens During the Bankruptcy?
During the bankruptcy you will be required to attend 2 counselling sessions with the trustee. The purpose of these financial counselling sessions is to give you an understanding of finances, give you the knowledge to manage your money successfully in the future, and to help you identify the causes of your bankruptcy so you don’t get into financial trouble once you’ve been discharged from bankruptcy.
Making Surplus income payments. During the bankruptcy process you might be required to make surplus income payments each month to your trustee. These fees are on top of the minimum filing fees.
Receiving Your Discharge From Bankruptcy
Most bankrupts receive an automatic discharge from bankruptcy in 9 months from the date of their bankruptcy filing. Receiving your discharge is what releases you from the obligation to repay your debts; the simple act of filing bankruptcy does not eliminate your debt, although you won’t make payments on your debt while you are bankrupt.
Only debts included in your bankruptcy forms are released; certain debts are not eligible to be released in bankruptcy, such as secured debt or types of unsecured debts such as fines, penalties, debt you obtained through fraud, alimony payments, child support payments and student loans if you stopped being a student less than 7 years ago.
When you will receive your discharge depends on certain factors such as whether you have been bankrupt before and whether surplus income payments are required; in most bankruptcies the automatic discharge occurs after 9 months.
What Happens After I’ve Been Discharged From Bankruptcy?
Once your bankruptcy is discharged your debts are eliminated and you will be debt free (with some exceptions, that you will be aware of before going bankrupt).
While a record of your bankruptcy will remain on your credit report for 6 years (or 14 years if you are filing bankruptcy a second time), you can begin rebuilding your credit immediately following your bankruptcy discharge. Your trustee will provide you a list of tips on how to rebuild your credit.
Schedule a Confidential Evaluation With a Local Trustee
Are you ready to learn more about how filing bankruptcy will impact you? Contact one of our Licensed Insolvency Trustees (LITs) in your area. You can schedule a confidential, no risk evaluation.