Details on the Bankruptcy Process in Canada
For people who are having financial difficulties and who are unable to pay their debts as they become due, bankruptcy is an option. Bankruptcy is a legal process that is outlined and regulated by the Canadian Bankruptcy and Insolvency Act (BIA). The BIA is a federal act. The federal Office of the Superintendent of Bankruptcy (OSB) supervises the administration of the bankruptcy process. The OSB also licenses and regulates trustees in bankruptcy. These are individuals who are trained and registered to administer bankruptcies and consumer proposals.
Most trustees offer a free initial consultation. During this consultation, the trustee can review your financial situation and provide you with information on the options that are available to you. Bankruptcy may be one option. However, for many people, bankruptcy is the final option. It is typically chosen when all other options have been exhausted. This does not mean that the bankruptcy process cannot be helpful to those who are struggling to pay down debts, however.
About Personal Bankruptcy
The bankruptcy process is designed to give those who are unable to pay their debts as they become due with a legal process that eliminates most (and, for many people, all) of their debts and start fresh.
When you file for bankruptcy, your trustee will review your financial situation and your assets. The trustee will ensure that you are able to keep the assets that are considered exempt. Different provinces allow different levels of exempt assets. You do not lose all of your assets when you file for bankruptcy. The goal of the bankruptcy process is not to punish you. The goal is to put you in a position to eliminate, your debt, distribute any available assets to your creditors and be able to rebuild your financial life. Therefore, you are able to keep certain assets that are deemed necessary to live a basic lifestyle. You also may be able to keep other assets, subject to certain conditions. Your trustee will assist you here.
If it is your first time filing for bankruptcy, you can be discharged in nine months, unless you are required to make surplus income payments. The Canadian federal government sets amounts that families of various sizes are allowed to earn without paying surplus income payments during bankruptcy. As one of your duties during bankruptcy, you are required to submit monthly income statements to your trustee. If your income is greater than the level set by the government for your family size, you will need to make surplus income payments. These payments will be made to your trustee, who will distribute them to your creditors. If you are required to make these payments, you can be discharged from bankruptcy in 21 months, if it is your first bankruptcy.
If you have filed bankruptcy in the past, you are eligible for discharge in 24 months (36 months if you need to make surplus income payments.)
Once you file for bankruptcy, you receive certain legal protection from your unsecured creditors. They are not able to contact you and they cannot send collection agencies after you. All communication with your creditors will be done through your trustee. In addition, your unsecured creditors cannot take any civil legal action against you to collect debt and, in most cases, they are no longer able to garnish your wages.
Duties During Canadian Bankruptcy
In addition to providing your trustee with monthly income statements, you will also be required to attend two financial counselling sessions. In these sessions, you will learn money management and budgeting tactics that can help you avoid financial trouble in the future. You will also be taught how to improve your credit score after the bankruptcy process has been completed.
Another requirement of the Canadian bankruptcy process is that you will need to keep your trustee up to date with your current address, phone number and work information.
Discharge from Bankruptcy
In the majority of cases, you will be discharged automatically after a specified time. Your trustee will sign your discharge paperwork and you will receive it by mail within 30 days. You should then send a copy of this paperwork to the major credit bureaus in Canada (TransUnion and Equifax). A note will remain on your credit report for six years after you have been discharged from bankruptcy (14 years if it is not your first bankruptcy).
Once you are discharged, you are free to begin rebuilding your financial life.
The Canadian bankruptcy process can help those who are struggling with debt get a fresh start and a chance to rebuild. If you are dealing with levels of debt that you cannot pay and if you are unable to meet your financial commitments, bankruptcy may be an option for you. Speaking with a licensed Canadian insolvency trustee can help you determine how to proceed based upon your unique financial situation.
- Getting Help from an Insolvency Trustee