How bankruptcies work in Canada?

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Filing for bankruptcy in Canada? First, contact a Licensed Insolvency Trustee who will assess your finances and guide you through the paperwork. Say goodbye to most unsecured debts but remember your credit score gets hit. Consider a consumer proposal for manageable payments instead. Trustees receive payment from lenders and creditors, so they aren’t on the side of Canadians in debt. Some may even charge you twice or add extra fees. Stay informed! Reach out via phone, text, or live chat if you need answers.

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Bankruptcies In Canada Question

how bankruptcies work in canada After losing my job, I fell behind on my payments. Now, I’m considering bankruptcy but have no idea how it works. I want to understand the process in Canada and what happens to my debts and assets.

From: Anonymous Question
Location: Hamilton, Ontario (ON)
Category: personal bankruptcy

Bankruptcies In Canada Answer

To file for bankruptcy in Canada, you’ll want to reach out to a Licensed Insolvency Trustee. They’re the experts who will help guide you through your financial maze. They’ll start by getting a good look at your financial condition. After that, you’ll need to fill out some paperwork, like an Assignment for the Benefit of Creditors and a Statement of Affairs. Once these are in, an automatic stay kicks in, which means creditors have to back off. Depending on where you live, you might have to give up some of your non-essential assets, but you’ll likely get to keep your basics, like household goods and your main ride. The whole process usually takes 9 to 21 months, depending on your income. Before you’re off the hook, you’ll also attend a couple of credit counseling sessions.

Most unsecured debts, except for things like child support and some student loans, get wiped out. You’ll hold onto what’s exempt, like necessary appliances and a vehicle useful for daily life, while other non-exempt goodies may be sold. If you’re looking for alternatives, there’s always the option of a consumer proposal for a more digestible payment plan or debt management plans with credit counselling. Keep in mind, though, that your credit score takes a hit — bankruptcy gives you an R9 rating that can stick around for up to seven years. After discharge, you can start mending your credit right away.

Just tread carefully since not every trustee can be your best pal. Trustees are paid by creditors and lenders, meaning they don’t work for Canadians in debt. Some may double bill or charge additional fees. Be aware! Reach out by phone, text, or live chat if you have questions.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

In Canada, the bankruptcy process is governed primarily by the Bankruptcy and Insolvency Act. When you file for bankruptcy, you submit a proposal to the Office of the Superintendent of Bankruptcy (OSB), and a licensed insolvency trustee (LIT) is appointed to oversee your case.

Once you initiate bankruptcy, an automatic stay of proceedings occurs, stopping creditors from taking action against you to collect debts. This means they cannot contact you for payments or start legal actions.

All unsecured debts, such as credit card debt and personal loans, are typically eliminated upon discharge from bankruptcy. However, some debts like student loans and child support may not be discharged, as outlined in section 178 of the BIA.

Regarding assets, certain exemptions apply. Generally, you may retain essential household items, a vehicle worth up to a certain value, and other exempt assets as specified in the regulations. For specifics, refer to regulations under Part 6 of the BIA and the exemptions detailed therein.

You must complete a series of duties, including attending credit counselling sessions and making payments based on your income, if applicable. A discharge from bankruptcy usually occurs after 9 to 21 months for first-time bankrupts, depending on whether all obligations are met.

Finally, note that bankruptcy affects your credit rating significantly, which can impact your ability to borrow in the future. For more detailed provisions, refer to Part 3 of the BIA regarding the obligations and process surrounding bankruptcy.

From: OSB Helper

Related Questions to How Bankruptcies Work In Canada

Here are the top 5 most frequently asked questions related to how bankruptcies work, based on the provided sources and general trends in online searches:

1. How long does personal bankruptcy last?

Personal bankruptcy typically lasts for 9 months for first-time bankruptcies, but can extend to 21 months if you have surplus income, and longer for subsequent bankruptcies[3][5].

2. What debts can be discharged through personal bankruptcy?

Most unsecured debts, such as credit card debt, personal loans, and CRA taxes, can be discharged through the bankruptcy process, but student loans and child/spousal support are not dischargeable[3][5].

3. Will personal bankruptcy affect my credit score?

Yes, personal bankruptcy will negatively impact your credit score and typically remains on your credit report for six to seven years from the date your bankruptcy is discharged[3][5].

4. What assets won’t be seized during personal bankruptcy?

Assets such as a primary motor vehicle (up to a certain value), household furniture or equipment, personal items, and necessary clothing are typically exempt from seizure, though exemption limits vary by province[3][5].

5. Do I still have to pay child/spousal support if I declare bankruptcy?

Yes, individuals owing child or spousal support are still responsible for making these payments, even if they declare personal bankruptcy for their other debts[3][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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