If you are unable to pay your debts as they become due, filing bankruptcy may be an option for you. Bankruptcy is a legal process that provides “honest yet unfortunate debtors” with an opportunity at a fresh start. Bankruptcy eliminates most (if not all) debts and puts you in a position to rebuild your financial life. However, despite this process being relatively well-known, many people still have questions and are unsure of the specifics. Here is some information on what you need to know about filing bankruptcy.
Bankruptcy is a Legal Process
Filing bankruptcy must be done with a licensed insolvency trustee. This is a person who has received training and is registered with the federal government. Licensed Insolvency trustees are regulated by the Office of the Superintendent of Bankruptcy and the bankruptcy process itself is laid out in the federal Bankruptcy and Insolvency Act of Canada. If you are in a financial situation where you are unable to pay your debt, and considering filing bankruptcy, you should speak with an insolvency trustee. Most trustees offer the initial consultation for free. In this consultation, the trustee will review your situation and provide you with information on the options that could help you.
Bankruptcy Provides Legal Protection
When you file for bankruptcy, you receive legal protection from your creditors. They are not able to contact you or take any steps to collect their debts. This means they can’t send a collection agency after you and calls from creditors will stop. In addition, in general any civil legal action that has been started against you and many wage garnishments that are in place must stop when you file for bankruptcy. However if the wage garnishment is in respect of an order in support of alimony or child support, this will continue. Your insolvency trustee will be responsible for all communication with your creditors throughout the bankruptcy process.
Bankruptcy and your Credit Report
When you file for bankruptcy, a note is added to your credit report stating this fact. This note remains on your report for six years after you have been discharged (if this is your first bankruptcy). Many people worry about this, however, if you are in a situation where filing bankruptcy makes sense for you, your credit report has likely already been damaged by missed payments or late payments. Filing bankruptcy gives you an opportunity to rebuild your credit rating once you have been discharged.
Only Unsecured Debts can be Included in Bankruptcy
Not all debts can be included in a bankruptcy. Bankruptcy only eliminates unsecured debts. These are debts such as credit card debt, personal loans, unsecured lines of credit, department store cards and other such debt. Student loan debt cannot be included in a bankruptcy unless you have been out of school for at least seven years.
You will not Lose Everything You Own
Many people think that you lose everything when filing bankruptcy. This is not true. You are allowed to keep items that are considered necessary to live a basic lifestyle. The exact type and value of assets that you are allowed to keep varies by province. Your insolvency trustee can provide you with the information that is relevant to your situation and ensure that you are able to keep all exempt assets.
Filing Bankruptcy is not the Only Option
If you are struggling with debt, bankruptcy is one option that you may wish to proceed with. However, it is not the only available option. Speaking with an insolvency trustee can help you understand the different options that are available to you. One option that may work for you, depending on your particular situation, is a consumer proposal. This is also a legal process. In a consumer proposal, you make an offer to each of your creditors to repay your debt on terms that you can afford. In many cases, this involves paying a portion of your debt over a specific period of time. During the initial consultation, the trustee will inform you if this is an option for you. When it comes to eliminating debt, there are several things that you need to know about filing bankruptcy. An insolvency trustee can provide this information and answer any questions you may have. Most trustees offer the initial consultation for free.