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Everything you need to Know about Canadian Personal Bankruptcy Rules

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    Personal Bankruptcy Laws CanadaMany people are misinformed as to what personal bankruptcy really is. Most people have heard of it, but the details remain a mystery to many. The fact that there are a lot of bankruptcy myths out there makes it worse. It’s easy to get confused. However, it’s important to remember that bankruptcy is a legal process in Canada. This means that it is governed by the Bankruptcy and Insolvency Act and regulated and managed by the Office of the Superintendent of Bankruptcy. This means that there is a specific process laid out and specific rules and conditions that apply. If you are considering filing for personal bankruptcy in Canada, you owe it to yourself to understand as much about the process as possible. Here are a few important rules and laws about personal bankruptcy that you should know and keep in mind.

    Only a Licensed Insolvency Trustee can File a Personal Bankruptcy on your Behalf

    A Licensed Insolvency Trustee is trained and licensed to administer the bankruptcy process by the Office of the Superintendent of Bankruptcy. Trustees are required by law to explain all of your options to you after reviewing your financial situation. Bankruptcy may not be your only option. By speaking with a trustee, you can find out if there are other options available to you, such as a consumer proposal.

    You Receive Legal Protection with you File for Personal Bankruptcy

    If you file for personal bankruptcy or consumer proposal, you receive special legal protection from your unsecured creditors. Creditors are not able to contact you. All communication will be done through your trustee. This means that you no longer have to worry about creditors and collection agencies hounding you. In addition, no creditor can take any legal action against you once you have filed and any legal action that is already under way will be stopped. Wage garnishments are also stopped and you return to receiving your full salary. Only garnishments on your wages for child support or alimony cannot be stopped. In addition, your debts stop accumulating interest once you file for bankruptcy or consumer proposal ( and your creditors have accepted your proposal)  

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    You Must be Considered Eligible to File for Bankruptcy

    Not just anyone can file for personal bankruptcy. In order to do so, you must be considered eligible. A person is considered eligible to file for bankruptcy if:

    • They are a resident of Canada (or have legal ties to Canada)
    • They are at least 18 years of age
    • They owe at least $1000 in debt
    • They are unable to pay their debts as they become due

    However, just because a person is eligible, it doesn’t mean that bankruptcy is the right choice. In order to determine if filing for personal bankruptcy is the right option for you, you should speak to a trustee in bankruptcy.

    Not All Debts can be Included

    Just because you have filed for personal bankruptcy, it doesn’t mean that every single one of your debts disappears. Bankruptcy is primarily for unsecured debts, such as credit card debt, lines of credit, overdrafts on chequing accounts and personal loans. Mortgages, automobile loans and other secured debts are not discharged as part of a bankruptcy. In addition, child support and alimony payments are not discharged in bankruptcy. Student loans that are less than seven years old are not discharged in a person bankruptcy. For specific information on whether or not your debts will be included in bankruptcy, please discuss the particulars of your specific situation with your trustee.

    The Assets you can Keep are Determined by your Province of Residence

    When you file for personal bankruptcy, you may be required to surrender some of your assets to the trustee. The trustee will sell those assets to pay your creditors. However, you do not lose all of your assets. There are laws in place that allow you to keep certain assets that are deemed essential or those are that considered necessary items. In most cases you are able to keep limited amounts of tools of the trade, household items and personal goods. However, the dollar values associated with these exemptions are determined by the individual provinces. Your Licensed Insolvency Trustee will work with you to ensure that you can keep all of your exempt assets.