Personal Bankruptcy In Canada
Personal Bankruptcy In Canada
Under the Bankruptcy and Insolvency Act (BIA) you, as a reasonable and honest individual, are given the chance to be released from your debts by declaring bankruptcy. If you perform certain duties required of you by law, your debts will be discharged or wiped out subject to certain exceptions (fines and fraud will not be discharged.)
Get a Fresh Start
- Bankruptcy is intended to allow you to get out of debt and make a fresh start. You can begin to rebuild a strong credit history right away.
Wage Garnishment & Collection Agencies
- Declaring bankruptcy stops your wages from being garnished and protects you from collection agencies and other legal action from your creditors.
- If it is your first time declaring bankruptcy, you may be discharged after as little as nine months.
- Generally, you are allowed to keep basic furniture and your personal effects when you go bankrupt, and under certain circumstances, you may even be allowed to keep your car; your house/trailer, RRSPs and life insurance policy.
- Any non-exempt assets must be surrendered to your LIT.
How To File Bankruptcy In Canada
In accordance with the Bankruptcy and Insolvency Act (BIA), Only a Licensed Insolvency Trustee (LIT) can file a bankruptcy. LITs are highly trained debt consultants, regulated by the Federal Government through the Office of the Superintendent of Bankruptcy (OSB). Here are the steps that you will go through with your LIT.
1. Initial Consultation – To file personal bankruptcy in Canada the first step is to meet with a Licensed Insolvency Trustee for a free consultation meeting. During this initial consultation, the trustee will review your situation and present you with available options.
2. Engage a Trustee – Once you choose to move forward with bankruptcy, you may enter into an agreement with the trustee. A deposit toward the bankruptcy fees may be required to commence the process.
3. Documents – The trustee will then prepare the necessary documents. When the documents are ready the trustee will meet with you again to review and sign the required forms.
4. Filing – After the trustee witnesses your signature the documents will be sent to the government via the OSB who will respond by issuing a Certificate of Appointment.
5. Stay of Proceedings – At this point your bankruptcy becomes official and there is a “stay of proceedings” which stops creditors from taking further action against you to recover any debts (collection calls, additional interest, wage garnishment, etc.).
The First Step:
The initial consultation meeting is free and confidential. Take the first step by finding a Licensed Insolvency Trustee near you!
Being Discharged From Bankruptcy
With bankruptcy, your debts are only eliminated once you are officially discharged. For this to happen you must fulfil certain duties, as required by federal legislation. Your duties as a bankrupt include the surrender of non-exempt assets to the trustee, attending two mandatory credit counselling sessions, monthly base payments to the bankruptcy estate, and any surplus income payments if applicable.
Automatic Discharge From Bankruptcy
If it is your first-time declaring bankruptcy and you have completed your duties, you may qualify for an automatic discharge after nine months. If it is your second time declaring bankruptcy you may qualify for an automatic discharge after 24 months. For this to happen the bankruptcy must not be opposed by your trustee or your creditors.
Without Automatic Discharge
If you do not qualify for an automatic discharge, your Trustee will apply to the courts for your discharge. In this case, there is a discharge hearing, which you will attend, where your Trustee will present the facts of your bankruptcy and your creditors may be present to object. After the hearing, you may be discharged by the court, or there may be additional steps required, and you may have to apply a second time to the Registrar in Bankruptcy.
Frequently Asked Questions:
What will you lose if you go bankrupt?
You will be required to give up a portion of your surplus income and any possessions that are not exempt in your province. The amount of your contribution from surplus income will be calculated by the trustee using a formula set by the federal Superintendent of Bankruptcy.
How much does bankruptcy cost?
There are many variable factors, but if you have a low income, and if it is your first bankruptcy, the cost is generally around $200 a month for 9 months. Your trustee will be able to give you more information and precise costs.
How long does the bankruptcy process take?
The process itself takes as little as 9 months if you are a first time bankrupt and 24 to 36 months if it is your second bankruptcy. At the end of the process, you will receive a Certificate of Discharge that releases your debts.
How will your bankruptcy impact your spouse?
Filing for bankruptcy does not directly affect your spouse or common-law partner. They are only liable for debts that they have co-signed or personally guaranteed (mortgages, joint credit cards, etc.)
Are there debts that won't go away with bankruptcy?
In general, you will be discharged from all your unsecured debts when you declare bankruptcy. However, there are some debts that won’t go away with bankruptcy, including student loans if your studies ended less than 7 years ago, child and spousal support, and court-ordered fines. A trustee can help you determine if any of these exceptions are applicable in your situation.
How long does the bankruptcy stay on my credit history?
The first-time bankruptcy stays on your credit bureau records for 7 years. The second time bankruptcy stays on your credit bureau records for 14 years.