How to File Bankruptcy
There are many reasons why people find themselves at the point where they feel bankruptcy is their only option. In some cases, they simply cannot pay their bills and are using what little, if any, credit they have to pay for basic means. Perhaps they’ve lost their job and either didn’t have or have already gone through their savings. Or, unexpected large medical bills could be part of the culprit. But regardless of why someone may be filing for bankruptcy, the end result and goal is always the same: to clear away debt they are unable to pay off otherwise. Learn how to file for bankruptcy with our step-by-step guide.
Benefits of the Bankruptcy Process
If you’re considering filing for bankruptcy, you may be wondering what the benefits of doing so are. It’s important to understand what happens after a discharge is obtained. Successfully filing for bankruptcy means that:
- Most unsecured debt will be eliminated
- Collections will cease
- Wages will not be garnished any longer
- You will embark on a fresh start, free from the financial burden of debt
Steps to Filing Bankruptcy in Canada
You can file for bankruptcy in Canada in just 6 basic steps. While they are fairly simple, you should understand that bankruptcy can be a time-consuming and in-depth process. Knowing what to expect is the first step, as having a basic understanding can help ease some of the stress and fear many people experience. Read on to learn how to file bankruptcy in Canada.
1. Understand Your Debt Situation
First, you must recognize that you are having financial problems, and you don’t believe you can work them out on your own.
Every individual situation is different, but the following signs are typical of money problems that warn you to take action:
- You have failed to make one or more payments on a mortgage or loan.
- Your credit cards are constantly at their limit.
- You are paying bills by taking credit card cash advances.
- Your creditors have passed your account to collection agencies, who are now calling
- You have received notice of legal action against you to collect money you owe.
- Both personal bankruptcy and consumer proposals can provide immediate protection from debt collectors.
- 128,846 Canadians became insolvent in 2018.
If you are feeling the pressure from debt, your first step is to make a commitment to explore your debt relief options.
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2. Select a Licensed Insolvency Trustee to Help You Understand Canada's Debt Regulations
Licensed Insolvency Trustees are the only people licensed by the Canadian Superintendent of Bankruptcy to administer consumer proposals and bankruptcies.
In order to declare bankruptcy or file a consumer proposal vou must work with a Licensed Insolvency Trustee.
Your trustee will provide information about consumer proposals, the process for filing bankruptcy, and about other debt relief options. Also, during the bankruptcy or proposal process your trustee will ensure your rights are respected.
When selecting your trustee, you should keep the following in mind:
- Your trustee should be local or at least easy to access.
- You should feel comfortable with your trustee. Ask them questions about your situation and make sure you understand their answers.
- Confirm they are licensed by the Superintendent of Bankruptcy (all trustees listed at Bankruptcy-Canada.ca are fully licensed).
Here on Bankruptcy-Canada you can find and connect with one of the top Licensed Insolvency Trustees that is local to you. We list only Trustees who have shown a long standing ability to help people find debt relief.
3. Meet with Your Trustee to Review Your Options
Now that you’ve selected your trustee you should contact them and schedule a free initial consultation. You will be asked to bring some specific details of your financial situation, including your income and expenses, assets and debts.
At your first meeting, your trustee will review your financial details, and outline the alternatives to bankruptcy that could be chosen in your case, ranging from debt consolidation through consumer proposals and including the bankruptcy process. Your trustee will provide you with information and advice on each which is best for you but the decision will remain in your hands and you will have as much time as you need.
- If you have enough income, debt consolidation or credit counseling are good debt relief options.
- Consumer proposals allow you to keep your house and other assets, subject to the rights of secured creditors.
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4. Filing For Bankruptcy
In the event you and your trustee choose to proceed with filing bankruptcy, your trustee will provide you with an information form to complete. In order to file the bankruptcy paperwork your trustee will need:
- Your personal information (name, address, birth date).
- A list of your creditors.
- A list of your assets.
After your trustee has your information, they will prepare the initial paperwork and review the bankruptcy process with you again. When you are ready, you sign the papers and your bankruptcy starts.
5. What Happens Once You File for Bankruptcy
Once your bankruptcy is filed, there is an immediate “stay of proceedings”. This means that unsecured creditors cannot begin or continue lawsuits, wage garnishees, or even contact you to request payment.
Within five days of the bankruptcy starting the trustee will send a copy of the bankruptcy paperwork to creditors, so they can file a claim.
The trustee will file outstanding tax returns up to the date of bankruptcy. Any outstanding taxes or penalties owed CRA will be included.
You will have certain obligations that you will have to fulfill including a monthly income statement and attending credit counselling sessions.
- Filing bankruptcy immediately halts most creditors from taking your wages.
- Your Trustee will deal with your unsecured creditors on your behalf.
6. What Happens After Bankruptcy?
Once your bankruptcy is discharged your debts will be cancelled (with minor exceptions). A note about your bankruptcy will remain on your credit report for a minimum of six years after the date of discharge. In most circumstances, your bankruptcy will be discharged in 9 months.
This means that for most people their debts are cancelled 9 months after filing for bankruptcy and they can start going through the process of rebuilding their credit. Your trustee can help you here as well by providing effective strategies for getting your credit back on track and helping you manage your money.
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