[et_pb_section fb_built=”1″ _builder_version=”4.5.1″ _module_preset=”default”][et_pb_row _builder_version=”4.5.1″ _module_preset=”default” width=”100%” module_alignment=”center”][et_pb_column type=”4_4″ _builder_version=”4.5.1″ _module_preset=”default”][et_pb_text _builder_version=”4.5.1″ _module_preset=”73e9af3e-a756-470b-a76a-6dad72cf9ad8″ hover_enabled=”0″]<\/p>\n
If you are wondering how bankruptcies work in Canada, we have put together a guide based on common questions. Simply put, bankruptcy<\/a> is a legal process that releases you from your financial obligation to pay your unsecured creditors. Typically this is for people who can no longer afford their debt. For Canadians, the procedures and policies around bankruptcy<\/a> have been designed to \u201crelieve honest but unfortunate debtors of their debts<\/a>\u201d.<\/p>\n Bankruptcy<\/a>\u2019s most obvious advantage is that it eliminates most of your debt, which would include: credit card debt, bank loans, business debts, income tax, payday loans, and consumer debts.<\/p>\n Knowing whether you should pursue bankruptcy can be a little tricky, but there are a few signs you should start looking for a Trustee. That you\u2019re using one credit card to pay for another and you\u2019ve been turned down more than once for extended credit. You repeatedly rely on payday loans to make it through the month. You have to skip payments or you\u2019re behind on accounts. If this sounds like you, then it\u2019s time to move forward with meeting a Trustee<\/a>.<\/p>\n Typically you\u2019ll get to keep your house, cars, and investments<\/a>. Once you\u2019ve filed, all legal actions, wage garnishments, and judgements will cease. Bankruptcy isn\u2019t free but for some, it\u2019s more affordable than the debt they have. The cost to file is regulated on the federal level and is dependent on household income, family size, and what assets you have.<\/p>\n While bankruptcy is often a last resort, there is simply no other process that eliminates debt as effectively when you\u2019re unable to pay. As Licensed Insolvency Trustees, we want to provide you with the necessary information to make a knowledgeable decision.<\/p>\n <\/p>\n Only a Licensed Insolvency Trustee (LIT) can file for you. Unless they\u2019re also LITs, even your lawyer<\/a> or accountant can\u2019t file on your behalf.<\/p>\n The great thing is this means you have a qualified professional to advise and administer the bankruptcy filings for you. As a group they\u2019re regulated by the federal government<\/a> and LITs must successfully complete the Chartered Insolvency and Restructuring Professional Qualification Program<\/a> to become certified. This program is supervised by the Office of the Superintendent of Bankruptcy.<\/p>\n These qualifications and trainings are necessary to ensure the integrity of bankruptcy as a process. It means you have a professional on your side who is well-versed in bankruptcy and who will look out for what\u2019s in your best interest.<\/p>\n <\/p>\n You can file for bankruptcy in Canada if you meet the following criteria:<\/p>\n To declare bankruptcy in Alberta<\/a>, you\u2019re required to meet in person with a certified Trustee and have her submit the necessary legal documents with the government. It\u2019s up the Trustee and you to decide if bankruptcy is the best solution since there is no kind of approval process to go through outside of meeting these criteria.<\/p>\n <\/p>\n Your first step begins with a free consultation meeting with a Licensed Insolvency Trustee<\/a>. This is a commitment-free meeting where you review the state of your finances and what options are available to you. Your Trustee will provide you with advice and information that is relevant to your situation.<\/p>\n At this meeting, you\u2019ll need to provide the Trustee with your personal information and the list of your creditors and assets. This gives the LIT an accurate picture. You\u2019ll then both review the paperwork together, and you\u2019ll sign the papers to initiate the bankruptcy process.<\/p>\n <\/p>\n Now that you\u2019ve signed the paperwork there are several steps in the bankruptcy process<\/a> after filing:<\/p>\n <\/strong>The stay of proceedings is a legal process that revokes your unsecured creditors of their collection rights. If they still call you, don\u2019t worry. Explain a bankruptcy has been filed and then forward them the phone number of your Licensed Insolvency Trustee. Your LIT will now communicate on your behalf to your unsecured creditors. The stay of proceedings also means unsecured creditors can\u2019t garnish wages, request payments, or continue lawsuits. It\u2019s important to keep in mind that your secured creditors can still seize assets if you don\u2019t keep up with your payments. Secured debts are things like mortgages, car loans, lawsuits, alimony, child support, or student loans. (More specifically on student loans, if you\u2019ve taken classes within the last seven years prior to filing.)<\/p>\n Simply put, the \u201cR\u201d means \u201crevolving or recurring credit\u201d and the nine means the debt has been sent to a collection agency or is included in a bankruptcy filing. It\u2019s common for people to worry about how a bankruptcy will affect their credit score. If you\u2019ve been behind on bills and are struggling to pay what you owe, it\u2019s likely your score has dropped quite a bit already. At this point, your credit might not be great, but you can absolutely repair it.<\/p>\n Your LIT will sell non-exempt assets and then use the money to pay your unsecured creditors. What is considered exempt<\/a> varies from province to province. Your LIT will guide you on what qualifies as an exempt asset. Don\u2019t worry, you\u2019ll still have everything you\u2019ll need for your life including your home, car, furniture, clothing, retirement savings, and other items.<\/p>\n <\/strong>In Canada, a monthly base payment is often required to the bankruptcy estate. For a first-time bankrupt this is more or less about $200.<\/p>\n These sessions review budgeting and finance to help you in your future financial life.<\/p>\n These monthly statements are required while you\u2019re in bankruptcy. You send the reports to your LIT and they detail the types of income coming into your household and how it\u2019s spent. Your Trustee uses this report to determine if you need to pay surplus income payments.<\/p>\n Surplus income<\/a> is a monthly payment calculated based on standards designated by The Office of the Superintendent of Bankruptcy Canada. This income is considered above what your household needs. Any surplus income payments will be sent to your Trustee. You can find instructions around surplus income payments in Directive 11R2<\/a>. If your income changes during bankruptcy, you\u2019ll need to tell your Trustee since this affects what you\u2019re paying.<\/p>\n Once you receive this document, you\u2019ve officially eliminated your unsecured debts. This comes after nine months or 21 months depending on if you\u2019re making income surplus payments. If you have been, then you can expect to be discharged at the 21-month mark.<\/p>\n A bankruptcy notation is on your credit history for seven years. After this time, there is no record to show that you have had a bankruptcy on your credit report. You can definitely rebuild your credit. In fact, if you meet the income tests you will qualify for most loans. There are lenders who specifically work with people who have poor credit. You can apply for a secured credit card while you\u2019re in bankruptcy. This is a card where you give the company $1,000 and then you get a line of credit worth $1,000. You can also re-establish credit by paying your bills on time and keeping within a monthly budget.<\/p>\n <\/p>\nCan an individual declare bankruptcy themselves?<\/h2>\n
Who can file for bankruptcy in Canada?<\/h2>\n
\n
How do you file bankruptcy in Canada?<\/h2>\n
What happens when you declare bankruptcy in Canada?<\/h2>\n
1. There is a \u2018stay of proceedings\u2019 protecting you from your creditors:<\/h4>\n
2. The bankruptcy is reported to the Credit Bureau resulting in an R9 rating on your credit report:<\/h4>\n
3. Surrender any non-exempt assets to the LIT:<\/h4>\n
4. Surrender any credit cards and the Trustee will close the accounts<\/h4>\n
5. Initiate making monthly payments to the “bankruptcy estate”:<\/h4>\n
6. Attend two required credit counselling sessions:<\/h4>\n
7. Submit monthly financial statements:<\/h4>\n
8.Make any surplus income payments:<\/a><\/h4>\n
9. Obtain your Certificate of Discharge:<\/h4>\n
10. Bankruptcy goes on your credit history:<\/h4>\n
Does bankruptcy clear tax debt with the CRA?<\/h2>\n