What is Bankruptcy?

Filing bankruptcy is a formal process where you meet with a Licensed Insolvency Trustee (“Trustee”) and file papers so that you can be released from any legal obligations to repay most, if not all, of your debts.

The intention of the bankruptcy process is to give people a fresh start and be allow them to move on with their lives without the burden of unmanageable debts.

How will it benefit me?

Upon filing bankruptcy, you get these immediate benefits:

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All collection actions, garnishments, harassing creditor calls stop.

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You can stop making payments to your unsecured creditors.

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The Trustee will contact your creditors, advise them of your bankruptcy, and instruct them to deal with the Trustee about your debt.

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Your assets and wages are protected from unsecured creditors.

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You get two financial counselling sessions with the Trustee to give you advice on managing your finances now that your debt payments are eliminated.

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Upon completion of the bankruptcy process, all your unsecured debts are discharged and reset to zero.

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You get a fresh start, and the Trustee will guide you on ways to repair your credit for future borrowing.

While nobody wants to go bankrupt, for those struggling in deep debt it can be the best thing they can do.

Life happens. It is not uncommon for Canadians to find themselves in a situation with more debt than they can afford. Because of high interest rates and unplanned expenses, once you are in deep debt it can be very difficult to climb out. What’s worse, for many people dealing with financial problems this will often result in emotional stress, health problems and destroy their relationships.

While filing bankruptcy may seem like a scary life event, it’s not nearly as bad as people think. You have already been through the worst of it living with your debt problems before you file.

Bankruptcy is a tool to be used to fix debt problems, so they don’t affect the really important things in your life like your health and relationships with loved ones.

The Bankruptcy Process

What to expect if you file for bankruptcy

How a Licensed Insolvency Trustee helps

Meet with the Trustee

The first step when considering bankruptcy is to meet with us for a free, confidential consultation. In this meeting we will listen and learn about your financial situation, review your options to reset your debt and develop a personalized debt solution that is tailored to meet your needs. We will keep it simple and explain it thoroughly so you can feel confident in your decision.

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Reset Your Debt

We do the paperwork to file your bankruptcy with the government. Then we contact your creditors to advise them of the bankruptcy and tell them to deal with us regarding your debt.

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Complete the Process

During the bankruptcy period, you will need to complete some duties such as report your monthly income to us and attend two financial counselling sessions with us. Now that your debt payments are eliminated, we will advise you on rebuilding your budget and help you decide what to do with your extra cash.

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Get discharged from Bankruptcy

At the end of the bankruptcy period, if you have completed your duties, you will receive a discharge from your bankruptcy. This means it is completed and all your unsecured debts are discharged and reset to zero. You will also receive guidance on how to rebuild your credit rating for future borrowing.

Is Bankruptcy right for me?

Nobody wants to go bankrupt, but the reality is for many Canadians that are struggling with a lot of debt, it is a reasonable and best option to get debt relief and achieve their long-term goals.

If you have a viable alternative that would result in you being able to pay off your debts in a reasonable time period, then you should give this a try and not rush into bankruptcy.

However, if you don’t have a workable solution, then ignoring the problem and sticking your head in the sand is the worst thing you could do. Living with money stress, stuck on a treadmill of paying minimum payments while struggling to buy necessities and meet the needs of your loved ones, is no way to live. We have witnessed people live through years of needless suffering just to try and avoid a short, easy, painless process. The comment we hear the most from our clients after filing bankruptcy is “I wish I had done this sooner”.

So if you are struggling with debt and you don’t know how you are going to be able to pay it off, we encourage you to not delay, it’s only going to get worse. Life is too short to spend it unhappily. Have a free meeting with us to get advice and find out your options. Don’t let fear and perceived stigma stop you from taking responsibility for your finances and making smart financial decisions that are best for you. There is a lot of misinformation out there about how bankruptcy works, so it is worthwhile to invest the time to get the facts from a licensed debt professional.

Studies have shown that for those that have a lot of debt, the ones that choose bankruptcy do better financially than those that don’t. Those that filed got access to more credit and had more financial resources than those who limped along and continued to struggle to pay their debts.

Alternative to Bankruptcy

If you are struggling with paying off your debt but want to avoid filing bankruptcy, a great option to consider is filing a consumer proposal. With a consumer proposal, you can avoid having to go through the more intensive bankruptcy process and yet still get protection from your creditors and relief from your debt.

A consumer proposal is where all the debtor’s unsecured debts are consolidated and reset to a lower total amount that the debtor can afford and the interest rate on these debts is reset to zero. The debtor agrees to a payment plan that is affordable for their budget and the debtor makes just one affordable monthly payment for a set period of time, to a maximum of 5 years. Once the agree upon amount is paid by the debtor, the remaining balance of the debts get reset to zero.

A consumer proposal is a much simpler and less severe process than filing bankruptcy. In a consumer proposal, there are fewer reporting requirements, the debtor doesn’t lose any assets and the debtors credit rating is not as severely impacted. A consumer proposal is an excellent way to avoid filing bankruptcy, but the debtor does need to be able to afford a settlement payment.

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Bankruptcy Myths

There is a lot of misinformation out there about how bankruptcy works. Unfortunately, sometimes these widespread perceptions can cause debtors to tolerate crippling, high interest rate debt rather than pursuing the debt relief provided to them from a bankruptcy filing.

Here are some of the common untrue myths:

If I file bankruptcy, I will lose all my assets.
Most bankrupts don’t lose any assets.

I’ll never be able to get credit again.
Most bankrupts are able to repair their credit shortly after their discharge.

Everyone will find out.
Bankruptcies are done confidentially and rarely advertised.

I could lose my job.
Bankruptcy should not affect your employment.

It will hurt my spouse.
Filing bankruptcy is personal to you it does not affect your spouse.

Only losers file bankruptcy.
Many successful and wealthy people have filed bankruptcy.

I make too much money to file bankruptcy.
High income people often need to go bankrupt too.

The creditors can fight my bankruptcy.
Creditors cannot stop you from going bankrupt.

You should wait until you are dead broke before you file bankruptcy.
Why wait, end the misery sooner rather than later.

I can’t go bankrupt more than once.
There is no limit to how many times you can go bankrupt.

F.A.Q.

What debts can be included in bankruptcy?

Bankruptcy will discharge all types of debts including:

All consumer debts such as credit cards, loans, lines of credit, personal bills
All business debts
Government debts (taxes, GST, payroll remittances)
Student loans
ICBC debts
Secured debts (if you are willing to give up security)

Who will know if I file for a bankruptcy?

For most personal bankruptcies, only the creditors and the government agency called the Superintendent of Bankruptcy will be advised you filed bankruptcy. It will also be listed on your credit report.

How much does it cost to file bankruptcy?

The amount you will be required to pay into your bankruptcy will depend on your income during the bankruptcy period.

Most people will pay the basic amount which is $200 a month for a 9-month term of bankruptcy.

What do I have to do during the bankruptcy process?

Every bankrupt is required to complete some basic duties as part of their bankruptcy:

Attend two financial counselling sessions with the Trustee
Report the amounts of your income earned each month
Make any required payment based on your income
Provide the information necessary to complete your income tax return
Advise the trustee if your address changes

What assets can I keep if I file for bankruptcy?

Most people that file bankruptcy do not lose any assets. The list of assets you are entitled to keep is set by provincial laws but in general there are amounts protected for each of the following:

Clothing and personal effects
Household items
Motor vehicle
Home equity
RRSP’s and pensions
Tools of trade

Which debts survive bankruptcy?

While most debts get wiped out when you file bankruptcy, some debts may survive:

Child or spousal support
Student loans if bankruptcy is filed within 7 years after studies ended
Court fines
Amounts owing due to fraud

Can I go bankrupt on student loans?

Yes, all types of student loans can be included in a bankruptcy. Upon filing bankruptcy, all collection actions for student loans ceases, wage garnishments stop and bank accounts get unfrozen.

If it has been at lease 7 years since you last went to school, the student loans will be wiped out in your bankruptcy. If it has been less than 7 years, then your student loan is not wiped out and once the bankruptcy is completed the student loan becomes due again.

If you have been out of school for at least 5 years when you file bankruptcy, if you are having difficulty paying the student loan you can apply to court to have the student loan wiped out.

Can I keep paying my secured creditors, for example a car loan or mortgage on my house?

Yes, it is your choice.

Choice #1 is you keep paying your secured creditor and then you can keep your security such as your car or house.

Choice #2 is you can stop paying your secured creditor and wipe out these debts in your bankruptcy, however, the secured creditor will probably take your secured asset, such as your car or house.

Will the creditors stop harassing me for payment when I file bankruptcy?

Yes, by law, all collection actions for debts included must cease upon filing bankruptcy.

Wage garnishments stop
Bank accounts get unfrozen
Creditors must deal with Trustee

How long will bankruptcy be on my credit report?

Your bankruptcy will be listed on your credit history for 6 years following the discharge of your bankruptcy.

This does not mean you cannot get credit for 6 years; it just means it is on your credit report. Most bankrupts are able to attain credit again soon after filing bankruptcy.

Can I file bankruptcy again if I have been bankrupt before?

Yes, there is no legal limit to the number of times you can file bankruptcy.

Does my bankruptcy affect my spouse?

No, filing bankruptcy is a personal thing and does not affect anyone else.

How do I choose a Trustee to file bankruptcy?

You will need to meet with a Licensed Insolvency Trustee to file bankruptcy.

We would recommend you choose a Trustee that is resident in your area and that is convenient for you to meet with. We would not choose a Trustee firm if they ask you to meet with a staff member instead of the Trustee. The Trustee is a debt professional and you want to get advice from a Trustee.

When talking with a Trustee, consider if they were empathetic, understood your concerns and clearly presented all your options available to you.

What are you waiting for? WE CAN HELP!

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To see if you are eligible for a debt reset couldn’t be simpler:

Fill out some basic financial information.
Email it to us.
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