What happens if you claim bankruptcy in Canada?

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In Canada, starting bankruptcy offers quick legal protection from creditor demands. A Licensed Insolvency Trustee (LIT) reviews your finances to see if this step is right for you. Once filed, you’re protected from unsecured creditors. You’ll attend counseling and might need to discuss details with creditors. Completing these tasks, you can gain a Certificate of Discharge, lifting most debts. Rebuild your credit score gradually. Reach out via phone, text, or live chat if you have questions. Not all trustees can be trusted.

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Bankrutpcy Claim Question

What happens if you claim bankruptcy in Canada? I’m thinking about filing for bankruptcy in Canada. What can I expect to happen during and after the process?

From: Anonymous Question
Location: Richmond, British Columbia (BC)
Category: personal bankruptcy

Bankrutpcy Claim Answer

Filing for personal bankruptcy in Canada kicks off a legal process that quickly shields you from creditor demands. The first step? A Licensed Insolvency Trustee (LIT) takes a deep dive into your finances to see if bankruptcy is the right move. Once the paperwork is in, you’re protected from unsecured creditors thanks to a stay of proceedings. You might need to chat with creditors about your bankruptcy details in a meeting.

The LIT will look after any allowable assets you have, potentially selling them to help settle outstanding debts. You’ll also need to keep them in the loop about any major financial changes and attend mandatory counseling sessions, which are designed to help you navigate future money matters.

Complete your duties, including the counseling and any payments, and you could earn a Certificate of Discharge. This magic paper frees you from most debts, though some, like alimony or child support, stay on your plate. Just keep in mind, this process might take a bite out of your credit score, and rebuilding it can take a bit of time. It’s all about that fresh start, but remember, there are some responsibilities and hurdles to consider along the way.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

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

1. Filing for Bankruptcy: You must file a bankruptcy application with a Licensed Insolvency Trustee, which will include your financial information, a list of creditors, and the amounts owed (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 49).

2. Stay of Proceedings: Once you file, an automatic stay comes into effect, halting most collection actions against you by creditors (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 69).

3. Meeting of Creditors: Your LIT may call a meeting of creditors where you will discuss your financial situation and their claims (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 102).

4. Asset Liquidation: Your non-exempt assets may be sold to pay creditors, with certain exemptions allowing you to keep essential items (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 67).

5. Discharge from Bankruptcy: After fulfilling certain conditions, you can obtain a discharge which releases you from most debts. This may take place automatically after 9 months if it’s your first bankruptcy and you meet all requirements; otherwise, it may take longer (Bankruptcy and Insolvency Act, RSC 1985, c 11, Sections 173-178).

6. Credit Reporting: Your bankruptcy will remain on your credit report for up to 7 years (for a first bankruptcy) to 14 years (for subsequent filings), affecting your credit score and ability to borrow (C.R.C., c. 368, Section 16).

7. Financial Counselling: You are typically required to complete financial counseling sessions to help you manage your finances going forward (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 67.1).

8. Potential Impact on Employment: Certain professions may have restrictions when it comes to employment if you are bankrupt, particularly in positions that involve financial responsibilities (Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 5).

9. Aftermath and Rebuilding: Post-discharge, you will have the opportunity to rebuild your credit and financial stability, although it requires time and responsible financial behavior.

You will want to consult a Licensed Insolvency Trustee for personalized advice and to ensure compliance with all legal requirements throughout the process.

From: OSB Helper

Related Questions to Claiming Bankruptcy In Canada

Here are the top 5 most frequently asked questions related to claiming bankruptcy, based on common online searches and current trends:

1. What debts are unaffected by bankruptcy?

Debts such as child support, alimony, and certain tax debts are typically unaffected by bankruptcy[1][3][5].

2. How long does bankruptcy stay on my credit report?

Bankruptcy typically remains on your credit report for 6 or 7 years after it is first reported[3][4][5].

3. Will filing for bankruptcy stop a wage garnishment and collection agencies?

Yes, filing for bankruptcy will stop wage garnishments and collection agency actions[1][3][5].

4. What happens to my assets and what can I keep when I file for bankruptcy?

You can keep certain essential assets, but the specifics depend on provincial exemptions and the type of assets you own[1][3][5].

5. How can I rebuild my credit after bankruptcy?

You can start rebuilding your credit by adopting positive financial habits, such as making timely payments on new credit, and seeking professional guidance if necessary[1][3][4].

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

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