What happens if I file for bankruptcy?

_{bankruptcy process, bankruptcy filing, Nova Scotia}

Starting the bankruptcy process in Canada involves working with a Licensed Insolvency Trustee (LIT) who examines your finances. They may propose a consumer proposal or bankruptcy. After filing, the LIT handles creditors, potentially liquidating some assets while offering counseling to regain financial footing.

Show Table of Contents

_{Navigating the bankruptcy process and creditor meetings in Canada.}

Bankruptcy Process Question

What happens if I file for bankruptcy? I need to know the overall process and consequences, like what happens to my assets and debts when I take this step.

From: Anonymous Question
Location: Halifax, Nova Scotia (NS)
Category: personal bankruptcy

Bankruptcy Process Answer

Filing for bankruptcy in Canada kicks off with teaming up with a Licensed Insolvency Trustee (LIT). These pros check out your finances and suggest options like a consumer proposal or straight-up bankruptcy. Once that’s sorted, your LIT files paperwork with the Office of the Superintendent of Bankruptcy, which declares you officially bankrupt and stops creditors from hounding you. You’ll attend a creditors’ meeting where your trusty LIT has your back. Your assets that aren’t protected might be sold to pay off what you owe, with secured creditors at the front of the line. Plus, you’ll join some counseling sessions to get your financial mojo back on track.

If you’d like help finding the best Trustee (LIT) for you - at no cost - let us know. We guarantee the lowest bankrtupcy cost to you.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you file for bankruptcy in Canada, several key processes and consequences occur:

1. Automatic Stay of Proceedings: Upon filing, an automatic stay takes effect, preventing creditors from taking collection actions against you. This is outlined in the Bankruptcy and Insolvency Act, RSC 1985, c. B-3, Section 69.

2. Appointment of a Trustee: A licensed insolvency trustee is appointed to manage your bankruptcy case. This includes assessing your financial situation and administering your estate, as stated in Section 14.01 of the Act.

3. Debt Discharge: The primary goal of bankruptcy is to discharge eligible debts, providing you with a fresh start. Under Section 178 of the Act, certain debts are non-dischargeable, such as student loans (if less than seven years old) and debts arising from fraud.

4. Asset Liquidation: Your non-exempt assets may be sold to pay your creditors. Exempt assets typically include necessary clothing, household items, and some equity in your primary residence and vehicle, as specified in Section 67 of the Act.

5. Duration and Filing Requirements: The bankruptcy process generally lasts for nine months for first-time filers not involving surplus income. After this period, you may be eligible for a discharge, which is detailed in Section 170 of the Act.

6. Impact on Credit Rating: Filing for bankruptcy will significantly affect your credit rating, typically resulting in a fresh start but with a credit rating that reflects the bankruptcy for six to seven years.

Understanding these aspects is crucial before proceeding with filing for bankruptcy, as it has lasting implications on your financial health.

From: OSB Helper

Related Questions to Bankruptcy Filing

Here are the top 5 most frequently asked questions related to filing for bankruptcy, based on the provided sources and general online trends:

1. Will I lose my house if I file for bankruptcy?

• Not likely, depending on the amount of equity in the home.

2. How long does bankruptcy last?

• It can last as little as nine months for a first-time bankruptcy, or 21 months if you have surplus income.

3. How does bankruptcy affect my credit score?

• Bankruptcy will severely lower your credit score, often by around 200 points or more, and it will remain on your credit report for 6 or 7 years.

4. When will creditors stop calling me if I file for bankruptcy?

• Creditors must stop contacting you directly once the bankruptcy documents are filed, due to a legal “Stay of Proceedings.”

5. How does bankruptcy affect my spouse?

• It does not affect your spouse unless they are a co-signer on the debt.

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

References

_{Table of article references}